By Dimitris Kourtesis, Tanker Chartering Broker
As we have entered the era off renewable energies, all industries globally give max effort to minimize their carbon footprint and consequently their emissions, so as the shipping industry. The IMO has set some goals regarding the decarbonization of the industry; the most challenging is to start replacing current marine fuels with greener, more efficient and eventually by 2050 eliminate the Sox and NOx along with GHG emissions.
The first stage of the plan was to cut down the Sulphur content of fuel oil to below 0.5%. Owners had the option to install scrubbers or from 1.1.2020 they had to comply and use only VLSFO. A year later it appears that Owners/Physical suppliers and Refineries were perfectly aligned to provide required quantities of VLSFO available almost everywhere in the world without disrupting the chain of global trade, thus proved from the fact that the spread between LSMGO and VLSFO was considerably small from the first few months.
Moving forward to cleaner, greener and more efficient marine fuels we identify three different pathways, 1) light gas, 2)Heavy gas and alcohol & 3) Biofuel. Due to current limitations on technology, ship designs and lack of expertise, it is anticipated to have petroleum-based fuels till 2050 at a market share of almost 40%.
Light Gas – LNG is cryogenic liquid that needs to be cooled and can be stored under ambient pressure, it is slowly but steadily increasing and is projected to have tripled to about 3000 units by 2030. Issues the industry needs to cope with are that not all ports have established local regulations and all necessary equipment/expertise to handle LNG, which actually limits the availability of the fuel.
Heavy gas and alcohol – LPG, is mainly consisted by propane and butane with small fractions of propylene Its available in large and scale and its economically attractive, worth to mention that it’s a liquid with very low handling requirements. In case of any leakage, it’s not harmful to soil and water. Alcohol, Methanol is attractive as marine fuel as its liquid in ambient conditions and simplifies the storage on board – it doesn’t not contain sulfur and little modification is required to engine and fuel supply system compared to LNG. Main issue that arises is the low energy density that keeps it less attractive for deep sea vessel, as it required 2-3 times higher frequency off bunkering than fossil fuels.
Biofuels – are produced by biomass, plants, waste oils and agricultural waste. Yield from the catalytic process of biomass has properties comparable to diesel oil and require minimum to no change to marine engines or their fuel delivery systems. The most usual component of biodiesel is fame (fatty acid methyl ester), widely provided blend of biodiesel consists of 7% of fame, but Owners / Engine manufacturers are currently experimenting with richer blends that vary from 20% up to even 100% of fame.
Looking further ahead Ammonia is an option as a zero-carbon and sulfur marine fuel if produced renewably and can contribute to reduction of GHG emissions. Its physical and chemical characteristics make it a suitable marine fuel as it’s a component used in industrial and agricultural makes it affordable and logistically attractive. It needs to be kept under pressure, but it can stay liquid in ambient temperatures. Specific modifications are required for ships that will use ammonia for propulsion as its lower energy density requires more quantity of fuel.
Recently Furetank Rederi had delivered the 7th ship out of a series of 8 that will be dual fuelled; vessel will run on LBG (Liquefied biogas) and LNG. The specific unit is the first one to perform discharge operation by using only electricity from shore. In addition, it is estimated that the ship will have 55% lower emissions of CO2, 86% of Nitrogen oxide, 99% of Sulphur oxide, and 99% of particles. Avin International has placed their first Suezmax order that will be ammonia ready.
It is becoming more and more apparent that owners have showed their intentions to minimize their emissions by experimenting with biodiesel mixtures, placing LNG/Ammonia ready new buildings.
Chartering (Wet: Stable + / Dry: Firmer)
The dry bulk market achieved another positive weekly closing, with all sectors displaying strong performance and w-o-w improvements in their average T/C earnings. The BDI today (26/01/2021) closed at 1,659 points, down by 106 point compared to Monday’s (25/01/2021) levels and decreased by 107 points when compared to previous Tuesday’s closing (19/01/2021). The crude carrier market took a positive twist compared to the weeks prior. With the exception of the VLCC rates which remained well under pressure for another week, the rest of the sizes witnessed w-o-w rate improvements. The BDTI today (25/01/2021) closed at 520, an increase of 24 points, and the BCTI at 513, an increase of 45 point compared to previous Tuesday’s (19/01/2021) levels.
Sale & Purchase (Wet: Softer / Dry: Firmer)
Appetite for dry bulk units made the headlines for another week in the Secondhand market with an impressive amount of Ultramax/Supramax sales materializing. At the same time, the number of secondhand tanker transactions was lower compared to the week prior while a healthy number of Container sales finalized last week. In the tanker sector, we had the enbloc sale of the “ECO FUTURE” (299,999dwt-blt ‘16, S. Korea) and the “ECO QUEEN” (299,985dwt-blt ‘16, S. Korea), which were sold to Bermuda based owner, DHT, for a price in the region of $68.0m each. On the dry bulker side sector, we had the sale of the “HAN FU STAR” (176,000dwt-blt ‘12, China), which was sold to Greek owner, NGM, for a price in the region of $18.1m.
Newbuilding (Wet: Softer / Dry: Firmer)
Newbuilding activity was mainly focused on the dry bulk sector this past week. Three newbuilding Panamax contracts emerged, all of them to be built at Nantong Xiangyu on behalf of Chinese domestic owners. In the tanker sector, there were no crude carrier orders last week. However, two MR vessels ordered by an undisclosed European owner at Hyundai Mipo and a small 9,200dwt product carrier contracted by CNOOC. Container units keep attracting a lot of interest; Chinese owner Ruiyang Shipping ordered eight firm plus two optional 1,800teu units at Yangzijang shipyard at a price of $23.0m each. Finally, another VLGC unit came to light last week. South Korean owner KSS Line ordered one dual fuelled 91,000cbm unit at Hyundai Hi, for an undisclosed price; this contract is followed by a 5-yrs T/C to PTT. January is about to end with a total of 5 VLGC being added to the Gas carrier orderbook.
Demolition (Wet: Stable-/ Dry: Stable-)
Prices in the demolition front were on a downward trajectory last week with falling steel plate prices across all Indian-subcontinent regions setting the negative tone while scrapping activity was subdued for the biggest part of the week. However, this negative correction was not as sharp in the values of the scrap prices offered by the Indian subcontinent cash buyers. In Bangladesh, average scrap levels were formed at the $450/ldt and $440/ldt for tanker and bulker units respectively with some sales appearing in the market at significant healthy levels. Demolition market activity in India remained quiet with the absence of HKC units being evident. In Pakistan, a moderate approach was followed by breakers in the region with scrap prices lagging behind their Bangladeshi competitors. The upcoming Chinese New Year Holidays may push some owners who are willing to dispose of their vintage units into negotiations and cash buyers to increase their levels to some extent. Average prices in the different markets this week for tankers ranged between 265-450/ldt and those for dry bulk units between $260-440/ldt.
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