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place is the ability (or inability) of owners to fully realize the higher time charter equivalents (TCE) for ships with low- ered fuel costs in the marketplace. As noted above, analyst reports are now routinely citing differentials where scrubber equipped vessels are “worth” more, on a daily basis, than ships burning higher priced low sulfur fuels. But, the abil- ity to realize these differentials is market dependent. In the current strong tanker markets, owners are more likely to cap- ture the types of differentials referred to Mr. Hannisdahl. In the tottering dry bulk markets, charterers may be reluctant to agree to premiums, where vessels burn cheaper high sulfur fuels.

While analysts like Jefferies’ Giveans and BTIG’s Lewis have kept a weather eye on out-of-service vessels waiting for scrubber retrofits, and their impact on hire markets, evidence of lengthy delays has been anecdotal, rather than rigorously reported. Around the end of Q3/beginning of Q4 2019, as the dry bulk market had strengthened, the conference circuit was full of chatter about how months-long waits for vessels at shipyards installing scrubbers would pull ships out of the market and drive capacity utilization to levels approaching 90% where market “inelasticity” brings about sharp rises in charter hires. These delays abated, as tanker owners cancelled yard work the sudden surge in tanker hires (tied to Mideast instability). Meanwhile, the dry bulk market sagged in Q4, with the sector’s shipping equities also pulled down.

Scrubbers are still a relative new solution in maritime cir- cles, and when the dust settles the investment in scrubber kit can be viewed as a “good” investment, with quicker paybacks than most maritime financiers could expect on other assets (a vessel, for example). However, the overall health of shipping company finances, and the views of equity investors who might buy and sell company shares, are still driven by the same very old and very familiar factors of supply, demand and geopolitical instability.

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