Platts news source highlights monthly market indicators for alternative marine fuels.
Global greenhouse gas emissions
July 2023 was the hottest month on record, with severe heatwaves and wildfires observed in the Northern Hemisphere, the EU’s Copernicus Climate Change Service said Aug. 8.
Global average surface air temperatures for July 2023 were estimated about 1.5 C warmer than the average for years 1850-1900, according to the EU’s climate monitor.
“2023 is currently the third warmest year to date at 0.43 C above the recent average, with the average global temperature in July at 1.5 C above preindustrial levels,” said Samantha Burgess, deputy director of the Copernicus Climate Change Service. “Even if this is only temporary, it shows the urgency for ambitious efforts to reduce global greenhouse gas emissions, which are the main driver behind these records.”
The shipping industry, which accounts for about 3% of all global greenhouse gas emissions, has been taking steps to switch the fuels it uses to power the fleet to meet the International Maritime Organization’s stringent 2030 and 2050 reduction targets.
Organization’s stringent 2030 and 2050 reduction targets
In conventional fuel oil markets, strengthening high sulfur fuel oil markets caused scrubber economics to worsen. The spread between high and very low sulfur fuel oil — called the Hi-5 spread — fell to an historic low of just $20/mt in Rotterdam on Aug. 8, down 54.3% on the week.
Narrow quality spreads were far below the $211.23/mt average assessed over the course of 2022 and down significantly from an average of $81.83/mt in the second quarter of 2023.
HSFO price strength has been driven by global sour crude tightness, as OPEC+ production cuts have dented high sulfur feedstocks and seasonal demand drivers such as Saudi Arabian power generation demand have proved supportive. In Europe, tightness has been particularly acute as refineries have had to pivot away from sour Urals crude to sweeter crude sources with lower residual fuels output.
Mass scrubber investment among shipowners post-IMO 2020 has supported HSFO demand as companies have sought to realize returns on these vessel upgrades.
Pavilion Energy and CNOOC Gas and Power Group successfully concluded their inaugural ship-to-ship LNG bunkering operation with the Maran Dione, Maran Tankers Management’s new-built dual-fuel very large crude carrier, in China. Axpo announced ship-to-truck bunkering capability based in Italy as well as ship-to-ship LNG bunkering Aug. 9. The company will build a new bunker vessel due to enter service in 2025 based in the Gulf of Naples and the adjoining Tyrrhenian Sea region. LNG bunker supplier Titan has completed the conversion of two gas carriers into LNG bunker delivery vessels. The conversions were done in Spain and Indonesia separately.
Platts, part of S&P Global Commodity Insights, assessed the Rotterdam LNG bunker fuel price at $15.761/MMBtu on Aug. 9, and the Singapore LNG bunker fuel price at $12.674/MMBtu on Aug. 8. Rotterdam LNG bunker sales more than doubled in the second quarter, comprising 3% of total sales, according to the port authority.
The UK government has published details of its low-carbon hydrogen agreement, the contract that underpins its low-carbon business model, supporting electrolytic and carbon capture-enabled production of the energy carrier. The business model will provide revenue support to hydrogen producers, making up the operating cost gap between low-carbon and higher-carbon fuels via 15-year contracts, the UK’s Department for Energy Security and Net Zero said on its website Aug. 9.
Platts will launch a Japan Korea Ammonia Price, the first market-based low-carbon ammonia price. The new assessment, CFR basis Japan and Korea represents the market price for ammonia with a maximum carbon intensity of 40g CO2eq/MJ. This assessment will bring transparency to a growing low-carbon ammonia market, driven by non-traditional sectors, notably power generation.
The Netherlands-based methanol producer OCI NV expects methanol demand to increase following growing orders for vessels which are fueled by the chemical. The number of methanol-fueled vessels on order has grown from 130 to 200, according to OCI, with the ships to be rolled out between 2023 and 2028, the company said in its Q2 2023 financial results.
Earlier in the second quarter, OCI announced a new partnership with Danish tanker group A.P. Moller-Maersk, fueling a green methanol-powered container vessel with ISCC-certified green methanol, supporting the decarbonization of the marine sector. Maersk ordered six vessels in June, while Taiwan-headquartered Evergreen Marine ordered 24 vessels, according to OCI.
Shipowner Hafnia confirmed Aug. 8 its first order for methanol dual-fuel Medium Range tankers. Three of the 49,800-dwt vessels will be delivered in 2025 with a fourth in 2026. The ships have been booked against long-term time charters to oil major TotalEnergies.
Bunker fuel supplier Peninsula completed its first biobunker delivery from its new chemical tanker in the Gibraltar Strait, joining suppliers such as World Fuel Services and Cepsa in seeking to cater to growing biofuels demand in the Mediterranean. The debut operation involved a ship-to-ship transfer to a 62,594 dwt Norden bulk carrier, La Luna, which loaded a fuel blend comprising 24% of used cooking oil and 66% of very low sulfur fuel oil June 19.
European biodiesel prices have been generally increasing from historic lows in the second quarter, although prices remain volatile and the market uncertain. Mandated pressure to increase biofuel blending in fuel oil has increased, with the IMO introducing new decarbonization targets and guidance on biofuels, as well as Norway introducing a 6% sales mandate for biofuels for bunker suppliers from October. Neste has begun producing a diesel oil of biocrude and fossil input at its refinery in Porvoo, Finland, delivering greenhouse gas savings of up to 80%. Traders said that Scan Ocean offers the Neste product at roughly $1,700/mt, about $750 over conventional marine gasoil.
Meanwhile, Hapag Lloyd announced a partnership with DB Schenker to run a biofuel shipping service.
Mercuria has partnered with ETA Shipping to promote sustainable short-sea shipping, with the joint venture forging ahead with at least six ships encompassing a modular design to achieve maximum efficiency, Mercuria said. The maiden voyage of the first ship among this fleet of ETA 6700 vessels was planned for Q2 2025, Mercuria said, adding that the move was in line with its energy transition agenda.
Norden has made an equity investment in biofuel developer MASH Makes to enhance its ability to secure the low-carbon fuel at competitive prices. Norden, which operates over 400 product tankers and dry bulk carriers, said it has acquired a minority stake in MASH Makes, a Danish-Indian firm that produces renewable fuels from biomass waste. Norden, which has aimed to achieve net-zero emissions by 2050, has introduced the fatty acid methyl esters-based B100 biofuel to some of its voyages in recent years, while developing green freight products to bypass decarbonization costs.
Platts will launch carbon emission charge assessments for its daily Aframax dirty tanker freight assessments. The carbon emission charge assessments will reflect the additional cost to offset 100% of carbon dioxide emissions created on voyages involving EU ports and European Economic Area berths, considering recent guidance in the final compromise text on the EU’s Emission Trading System released by the European Parliament Environmental Committee on Feb. 9.
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