- Surging biofuel demand in shipping outpaces production capacity for biodiesel and bio-LNG.
- Unconstrained demand could exceed 140 million tonnes by 2028, while total biofuel output peaks at ~120 million tonnes.
- Allocation challenges leave only 6% of biomethane available for maritime use, intensifying the shortfall.
The shipping industry’s commitment to net-zero carbon emissions has accelerated its interest in biofuels, which can be used with existing engine technology. A recent analysis from Rystad Energy reveals a significant mismatch between the burgeoning demand for biodiesel and bio-LNG and the industry’s production capacity.
Supply-Demand Imbalance
According to Rystad, “Unconstrained biodiesel demand exceeds total supply and the outlook for bio-LNG is equally restricted, in both allocation and production.” Global biodiesel demand in shipping could surpass 140 million tonnes of fuel oil equivalent by 2028, yet total biofuel production is projected to max out at approximately 120 million tonnes. If stricter sustainability criteria prioritize second-generation biofuels, supply could drop to just 40 million tonnes.
Junlin Yu of Rystad Energy noted: “Demand for biodiesel, if unrestricted, outstrips the total supply. The situation with bio-LNG is also constrained, with challenges for both production and allocation capacity.” Although biomethane demand may rise to 16 million tonnes by 2028, over 84 percent is earmarked for power generation and another 10 percent for road transport, leaving a mere 6 percent for all other sectors, including shipping.
Economic and Regulatory Viability
Biofuels present a potentially more economical route than conventional marine fuels like very low-sulfur fuel oil, particularly under the IMO’s GFI standard. Blending biofuels at 30 or 50 percent offers a near-term reduction in emissions, while transitioning to 100 percent biofuel yields the greatest long-term benefits. Bio-LNG, especially when subsidized, can be more cost-effective than biodiesel, positioning it as a valuable interim fuel choice.
However, Rystad cautions that without robust planning and supply-securing measures, biofuels’ role as a stopgap could falter. Yu emphasizes that biodiesel and bio-LNG “can be cost-effective under the IMO Net-Zero Framework, but only if their lifecycle greenhouse gas (GHG) emissions are low enough to qualify for IMO incentives.” To meet tightening regulations and GFI targets, shipowners must act swiftly to lock in reliable biofuel sources and prepare for evolving market dynamics.
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Source: TradingView
