Tankers’ Embrace of New Technology
July 21, 2023
Building on our recent NB story (Weekly Blog June 23rd: Tanker Newbuilding Market: Cautiously Optimistic), we would like to further analyze the state of embrace of new technology. VLCCs, the largest and most expensive tankers, can better adopt new technological solutions as the marginal cost of installations will be less than on smaller ship types – making a lot more financial sense. As an example, a scrubber-fitted VLCCs saved as much as $20,000 in daily fuel costs compared with VLSFO consumption in March 2022 when Russia’s invasion in Ukraine pushed bunker prices up significantly. Figures support this when looking at the current tanker fleet for 2023: MR’s have the fewest number of scrubbers installed at only 8% of fleet and VLCCs have the largest number of scrubbers installed at 33%. Figure 1 shows the number of VLCCs with scrubbers tripled since 2019.
Figure 1: Historical VLCC Fleet by Scrubber vs No Scrubber Figure 2: 2023 Tanker Fleet by Scrubber vs No Scrubber
VLCC NB orders reveal that the new preference is in dual fuel vessels comprising 79% of NB VLCC all of which are LNG fueled. This shift is driven by the ever more stringent IMO emission regulations pushing shipowners to higher tech higher cost solutions supported by the favorable financing terms for more ecologically sound tecnology. The enthusiasm for scrubbers has thus diminished intensified by the narrowing of the VLSFO vs HSFO differential that reduces the fuel savings. This might explain the persistently higher NB prices as shipowners are betting on new technology to make sure they have most chance for trading their ships profitably. Only 2 ships out of 14* confirmed on order do not have Scrubbers or dual fuel capability, signaling a fundamental shift in the market.
*Confirmed VLCC NBs with IMO numbers; recent Dynacom orders are excluded from this statistic.
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