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STAR BULK'S 110 SCRUBBER 'HERCULEAN PROJECT'

Tuesday, January 28, 2020 

Greek dry bulk shipping company Star Bulk was one of the operators who adopted the scrubber solution pre-IMO2020, an investment that has paid off handsomely, as Star Bulk Chief Strategy Officer Charis Plakantonakitold the recent Marine Money Ship Finance Forum in London.

Star Bulk took the decision to fit exhaust gas cleaning systems (scrubbers) to its entire 110-strong fleet, which  Plakantonaki described as a 'Herculean project', referring to the hero of Greek mythology who was made to carry out 12 seemingy impossible tasks. Fitting scrubbers meant high capital expenditure, financed by US$150m of loans, and the need to take ships out of service while the work was undertaken. But the effort has paid dividends - it was a gamble, based on the certainty that there would be a price differential between the traditional, cheap, heavy fuel oil which the scrubbers enable the company to continue to burn, and the IMO2020-compliant very low sulphur alternatives which would be mandatory for non-scrubber fitted vessels after 1 January 2020.
Analysts from BIMCO reported that in Singapore, the world's largest bunker port, the difference in price between the fuel grades did, at one point, exceed US$300/tonne, which represents a very short, about 18-month, payback period for the scrubber equipment. The gap has since closed slightly, but experts believe it could widen again as demand for low-sulphur fuels increases. Naturally, Plakantonaki expressed the hope that it would widen further, which means the HFO price advantage would particularly benefit the dry bulk market, which is not having an easy time.
Although scrubbers have proved the optimum short-to-medium term solution, Plakantonaki acknowledged that more radical solutions will be needed in order to meet the IMO goal of reducing carbon emissions by 2030, and again in 2050. But for now, Plakantonaki says Star Bulk has the tools to ensure environmental compliance form its current vessels. Although these are not enough to get the fleet beyond 2030 and 2050, they provide a good start.

Star Bulk took the decision to fit exhaust gas cleaning systems (scrubbers) to its entire 110-strong fleet, which  Plakantonaki described as a 'Herculean project', referring to the hero of Greek mythology who was made to carry out 12 seemingy impossible tasks. Fitting scrubbers meant high capital expenditure, financed by US$150m of loans, and the need to take ships out of service while the work was undertaken. But the effort has paid dividends - it was a gamble, based on the certainty that there would be a price differential between the traditional, cheap, heavy fuel oil which the scrubbers enable the company to continue to burn, and the IMO2020-compliant very low sulphur alternatives which would be mandatory for non-scrubber fitted vessels after 1 January 2020.

Analysts from BIMCO reported that in Singapore, the world's largest bunker port, the difference in price between the fuel grades did, at one point, exceed US$300/tonne, which represents a very short, about 18-month, payback period for the scrubber equipment. The gap has since closed slightly, but experts believe it could widen again as demand for low-sulphur fuels increases. Naturally, Plakantonaki expressed the hope that it would widen further, which means the HFO price advantage would particularly benefit the dry bulk market, which is not having an easy time.

Although scrubbers have proved the optimum short-to-medium term solution, Plakantonaki acknowledged that more radical solutions will be needed in order to meet the IMO goal of reducing carbon emissions by 2030, and again in 2050. But for now, Plakantonaki says Star Bulk has the tools to ensure environmental compliance form its current vessels. Although these are not enough to get the fleet beyond 2030 and 2050, they provide a good start.

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