With the deadline to comply with IMO 2020 less than six months away, Chinese manufacturers of exhaust gas cleaning systems (EGCSs) for ships appear to be gaining traction in the race to seize market share from their Scandinavian rivals.

The segment’s rising stars include Shanghai Bluesoul Environmental Technology Co. (Bluesoul). The company made waves this summer after completing a retrofit for Orient Overseas Container Line (OOCL) in just four months—which, according to the supplier, represents a new world record.

The EGCS installation involving the 13,200-teu containership OOCL Singapore (built in 2014) took place at a CSBC Corp shipyard in Taiwan. It’s unclear whether the Hong Kong carrier intends to equip more tonnage with scrubbers in the months ahead, but sources say Bluesoul and CSBC are actively pursuing similar projects with other operators in the same segment.

Scrubber rooms ready to be lifted onto the OOCL Singapore. Photo: Bluesoul

Waves of change

In late 2018, OOCL outlined plans to begin the transition to low-sulphur fuel in the second half of this year to ensure compliance with IMO 2020 by the 1 January deadline. At the time, this led many industry insiders to believe that scrubbers weren’t on the cards for the carrier.

More recently, OOCL published an annual report where management indicated that—in addition to low-sulphur fuel—they would also consider “implementing scrubber technology” as a means of allowing the fleet to continue to burn what was described as “lower-cost, high-sulphur fuel.”

Bluesoul vice president Jay Zhang says he wouldn’t be surprised to see other owners of large containerships, tankers and bulkers similarly change their tune at some point in the near future amid lingering concerns about the cost and availability of low-sulphur fuel.

Photo: Bluesoul vice president Jay Zhang

“The high differential between the price of compliant fuel and IFO 380 [heavy fuel oil] can be foreseen,” he argues. "With a return on investment in as little as one to two years, more and more shipowners will find that EGCS offers the best route to compliance with IMO 2020.”

Owners head East

While Scandinavian scrubber manufacturers have seen ordering slow since the start of 2019 and production capacity remains constrained in their corner of the market, the opposite is true in China where capacity and demand appear to be on the rise.

“Ordering wasn’t nearly as crazy in the first half of 2019 as it was in the second half of 2018, which is largely due to the fact that most of the drydock and wharf spaces at Chinese shipyards are booked for the remainder of 2019 and early 2020,” Zhang said. “That said, here in China, scrubber demand is still relatively robust. There’s been no shortage of queries.”

Hindsight is 20/20

While many classification societies predicted that the scrubber market would cool down in 2019 due to the lead-time needed for installation and the fact that many of the top manufacturers were already working at or near capacity, others forecast a surge in activity.

Late last year, Goldman Sachs published a report positing that concerns surrounding manufacturing capacity were overblown.

The investment bank argued that smaller players would step up to the plate in response to rising demand fueled by heightened certainty surrounding the implementation date of IMO 2020, as well as other factors—like fuel oil spreads hitting levels that make scrubbers a more economically attractive option than low-sulphur fuel.

The countdown continues

Zhang says it’s not too late for shipowners to complete an EGCS installation by 1 January 2020. Still, he concedes that time is running out.

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For its part, Bluesoul is equipped to design, deliver and commission 50 more scrubbers between now and year-end. The company says it has manufactured and installed 100 systems since its inception. In addition to OOCL, the list of counterparties includes Stena Bulk, Ibaizabal Tankers and Sumec Ocean Transportation, among others.