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Alternative Marine Fuels: Monthly Market Indicators

Global seaborne trade will return to growth in 2023 as the shipping industry emerges from post-pandemic supply chain issues and adapts to changing cargo flows in the wake of Russia’s invasion of Ukraine, the UN Conference on Trade and Development said Sept. 27. In its annual Review of Maritime Transport report, UNCTAD said maritime trade volume will expand by 2.4% this year after contracting by 0.4% in 2022 as “the industry remains resilient.”

However, In July, the International Maritime Organization set targets to reduce life-cycle greenhouse gas emissions from cross-border shipping by 20%-30% by 2030 and 70%-80% by 2040 versus 2008, before reaching net-zero emissions close to 2050. While calling on the shipping industry to kickstart a low-carbon transition, UNCTAD said annual investments of $8 billion-$28 billion may be required to decarbonize ships and $28 billion-$90 billion to decarbonize fuel supplies by 2050.


The EU should put more onus on marine fuel suppliers to provide green alternatives to conventional oil-based fuels in its efforts to promote the shipping industry’s low-carbon transition, said Sotiris Raptis, secretary-general of the European Community Shipowners’ Associations (ECSA) in an interview with S&P Global Commodity insights. Brussels is scheduled to extend the EU Emissions Trading System to cover maritime transportation from 2024 and introduce the FuelEU Maritime regulations on the greenhouse gas intensity of bunker fuels from 2025, and the two regulations mainly apply to ship operators involved in trading with the bloc. Raptis, whose organization represents 20 shipowners’ associations in EU member states and Norway, said the new rules are positive for the energy transition but the EU also should have “more robust requirements” for bunker suppliers.

Only 16% of product tankers on order are being designed to run on alternative fuels, despite a recent strengthening of international marine decarbonization targets, according to shipping industry body BIMCO. By contrast, 50% of containers in the order book are expected to have some level of preparation for alternative fuels and bulk carriers 9%, BIMCO Chief Shipping Analyst Niels Rasmussen told S&P Global Sept. 21

Shipping lines CMA CGM and A.P. Moller-Maersk have teamed up to promote the use of alternative marine fuels in container shipping in the hope of accelerating their decarbonization via cooperation, the companies said Sept. 19. In a joint statement, the two of the world’s largest container lines said they “will work more together to develop the use of alternative greener fuels for container vessel propulsion” and hope to find more like-minded partners. The areas of cooperation will cover developing standards for sustainable fuels, setting the framework of mass production of green methane and green methanol, maintaining standards for operating methanol-capable ships with regards to safety and bunkering, accelerating port readiness for bunker supply of green methanol, and joint research and development of new fuels like ammonia.

Container shipping companies could face a shortage of green fuel supply as their order book size for dual-fuel ships grow, German line Hapag-Lloyd CEO Rolf Habben Jansen said Sept. 20, calling on energy majors to invest more in the emerging sector. Methanol has emerged as the most popular alternative fuel for shipowners in newbuild projects over recent months, with shipbroker Braemar estimating that the number of boxships on order capable of running on the fuel increased to 140 as of Sept. 13 from 107 in end-May.


The price of LNG as a bunker fuel in Singapore rose to a seventh-month high Sept. 25, amid higher prices in the cargo market. Platts, part of S&P Global, assessed the LNG bunker price in Singapore at $17.596/MMBtu Sept. 25, the highest since Feb. 10, when it was assessed at $16.638/MMBtu. A strong cargo market has likely been driving the support for the bunker market. Bunker fuel prices have also been creeping up in Europe and the US Gulf Coast, although less so than in Singapore. Fundamentals in the European cargo market are somewhat more bearish, with healthy European gas inventories and operations at Norway’s Troll gas field complex having resumed. Singapore LNG bunker fuel is $3.221/MMBtu more expensive than in Rotterdam.

Indonesia’s state-owned energy company PT Pertamina’s natural gas subsidy PT Perusahaan Gas Negara TBK (PGN) along with three Japanese companies — JGC Holdings Corp, Osaka Gas and Inpex Corp — have begun a study to commercialize biomethane production from palm oil mill effluent (POME) in Indonesia, according to joint release Sept. 25. The biofuels-led decarbonization effort by the consortium is expected to scale up biomethane operations to supplying bio-LNG from biomethane as a bunker fuel. This in turn will also be considered for export as bio-LNG primarily to Japan and other markets as well.

Shell has wrapped up its first-ever cruise ship LNG bunkering in the Port of Gibraltar, the company’s global head of downstream LNG, Tahir Faruqui, said in a LinkedIn post Sept. 26.

“This operation was also the Port of Gibraltar’s first ‘in-port’ bunkering, highlighting Shell’s commitment to develop Gibraltar as a key LNG bunkering hub, offering bunkering services both within the port and at the anchorage, ” he said. Shell completed its first ever LNG bunkering operation at the Port of Gibraltar back in March 2021.


Among renewable fuels of non-biological origin, some industry research suggested e-methanol and e-ammonia have the greatest potential to emerge as future marine fuels to decarbonize shipping. In its reference case, S&P Global expects methanol to make up 34.3% of low-carbon bunker supplies in 2030, sitting at the pole position. Separately, demand for low-carbon ammonia from the maritime industry will reach 166 million mt in 2050 due to decarbonization requirements, according to S&P Global. But the current production of “green” methanol and ammonia is small, and many industry participants said high prices and limited availability could delay their uptake.

Global blue ammonia cost-of-production price assessments edged higher in August, with Northwest Europe retaking the price top spot from Far East Asia, and US Gulf prices recovering after a protracted spell of falls. Supply constraints were at the fore in conventional ammonia markets, pushing prices higher. Prices in the Middle East rose sharply, with FOB blue ammonia prices climbing more than 20% month on month to average $369/mt in August.


Greek dry bulk operator Diana Shipping has preliminarily agreed to order two methanol-capable Kamsarmax vessels in its first investment on alternative propulsion, the company said Sept. 27, betting on the fuel’s decarbonization potential. In a statement, the New York-listed company said it signed a letter of intent with Japan’s Tsuneishi Shipbuilding for two 81,200-dwt dual-fuel ships capable of running on methanol and oil-based fuels for $46 million each. Tsuneishi has firm contracts to build four Kamsarmaxes for shipowners Mitsui & Co. and J. Lauritzen, and the ships are due to be delivered in 2025-26. US trader Cargill has fixed them on long-term period charters and will be responsible for fuel costs.

US-based fuel producers are looking to rapidly ramp up “green methanol” output from later this decade, with demand from the shipping sector set to rise due to decarbonization requirements. Current and future executives at SunGas Renewables, Carbon Sink and WasteFuel told S&P Global that their targeted production capacity together reaches nearly 4.4 million mt/year, mainly at sites in the US where the Inflation Reduction Act is expected to offer large subsidies to low-carbon transitions projects. David LaMont, a senior vice-president at Houston-based SunGas, said the company is targeting building six plants each with a capability of around 400,000 mt/year that can convert residues from the forestry and wood products industries into methanol, with a total capital investment of nearly $9 billion.

Danish investment group AP Moller Holding and Dutch fuel producer OCI Global have announced new plans to ramp up “green methanol” production, putting the carbon-neutral fuel as a firm front-runner as future marine fuel. On Sept. 14, AP Moller said it had formed a joint venture with subsidiary A.P. Moller-Maersk — one of the world’s largest container lines — to develop large-scale facilities for e-methanol and bio-methanol for shipping and some other hard-to-abate sectors.

C2X, 20% owned by Maersk and 80% by its parent, aims to have a total production capacity of more than 3 million mt/year by 2030 across the globe and is currently focusing on some projects near the Suez Canal in Egypt and the Spanish port of Huelva, according to a statement.


Brazilian President Luiz Inacio Lula da Silva and cabinet members signed a bill for a biofuel program, called Combustivel do Futuro — or Fuel of the Future — which essentially seeks to promote sustainable, low-carbon transport fuel alternatives that will allow Brazil to meet its international greenhouse gas emission targets quickly. The program was originally launched by the National Energy Policy Council in April 2021, through CNPE Resolution No. 7.

Biofuel production globally is not progressing fast enough for the global energy sector to reach net zero emissions of carbon dioxide by 2050, the International Energy Agency said Sept. 26 in its updated Net Zero Roadmap, with availability of feedstocks and food and fertilizer prices posing big challenges. Biofuel output has increased on average by 4%/year over the last five years, but it needs to increase by an average of 13%/year to reach an 11 Exajoules (EJ) target by 2030, the Paris-based inter-governmental agency said. Biomass-based diesel, for instance, has expanded at an average of 9% worldwide for the past five years. Existing and announced projects would cover half of the increase in demand, assuming they all go ahead, the IEA said.

Bunker fuels

Bunker Holding, one of the world’s largest marine fuel suppliers, aims to have green fuels make up at least 5% of its volumes by 2030 in a bid to match the IIMO’s climate ambition. In its latest annual environmental, social and governance report published Sept. 20, the Danish company said it will invest a minimum of $50 million in 2023-28 to support several decarbonization targets for its supplied fuels. Aside from the 5% goal, Bunker Holding also aims to reduce the carbon intensity of its fuels by 4.5%-8.5% by 2030, against the level seen in its fiscal year 2022-23 (May-April), according to the report.
Source: Platts

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