By Katerina Restis, Tanker Chartering
Over 90% of the world’s goods are transported by sea. LPG is a clean, energy efficient and portable fuel that is being marketed at an affordable price, while it is promptly available across the globe. LPG is mainly sourced from natural gas and oil production operations, but as new technologies and techniques grow, it can be further produced from renewable sources. Currently, LPG is already a preferred marine fuel solution for LPG carriers. Furthermore, the World LPG Association has stated that LPG as a marine propulsion fuel will play a leading role towards IMO's 2050 regulations, which will require further reduction on greenhouse gas emissions by at least 50% until 2050, compared to 2008. As stated by the WLPGA association with the marine industry pressured to comply with IMO 2020 by reducing emissions, LPG can make significant inroads into the marine fuel market. Hence, LPG propulsion, starting with the LPG carrier sector, needs to move beyond a niche fuel option, to gain the acceptance in the wider shipping sector that it deserves.
The current demanding environmental regulations and large capital investment required to set up new facilities, have restrained the market growth. Advancements in technologies, such as new alternative fuel propulsion engine technologies, are expected to boost market growth. LPG as a propulsion fuel is today almost absent from the shipping sector and especially from commercial vessels, where the vast majority of engines are diesel, and alternative fuels solutions such as LNG continue their growth. However, regarding larger commercial and passenger ships, LPG is starting to get some attention as it stands as a likely alternative among the other gaseous fuels. Ship operators, with traditional propulsion plants and fuels, mainly couldn’t meet the new 2020 regulations without installing expensive exhaust equipment or switching to low‐sulphur diesel, low‐sulphur residual, or other alternative fuels, all of which have an impact on profit. As attention turns to an array of possible solutions, heavy-sulphur fuel oil with scrubbers, distillates, blended fuels and LNG, so as to comply with the IMO's 0.5% global sulphur cap regulation, LPG may gain more acceptance as a viable solution, as compared to LNG, which is more problematic and expensive to implement.
As reported LPG's growth will be fast-tracked, since the infrastructure for distribution and bunkering is already largely available to serve potential marine market demand. There are more than 1,000 LPG storage facilities worldwide that can be used for LPG bunkering, and more than 700 small size LPG carriers, that can be used for ship-to-ship bunkering. It is worth to mention that in 2018 Dorian LPG entered into a MOU with Hyundai Global Service to undertake research and engineering studies to upgrade the main engines of up to 10 of the Company's VLGCs to dual fuel technology utilizing LPG as fuel in anticipation of environmental regulations. LPG supply surplus is an additional advantage with production excess ranging from 15 to 27 ΜΤ per year, which are either used or “lost”. Reduce LPG prices (comparatively to LNG) driven by the shale gas revolution is also an important driver for market entry.
On the other hand, the use of LPG as a marine fuel faces challenges that need to be defeated such as the investment required by ship owners and fleet operators and the need for LPG to be on a level playing field with other alternative fuels. Also, the prerequisite of technology development of new engines together with the necessity of commercialization of these new engines.
Last but not least, shipbuilders are already considering vessel designs that use LPG as propulsion fuel. It can be used in all sizes of vessels from the largest ocean going ships, down to the smaller boats with inboard or outboard engines. It may play a leading role in this changing environment and re-establish its position, as an effective alternative clean marine fuel. Coordinated action from all related stakeholders is key to address the identified specific issues that hinder development and release the market potential.
Chartering (Wet: Soft- / Dry: Firm+)
With the exception of the Capesize sector, all other dry bulker segments showed an improvement in rates compared to a week prior. Increased mobility across both basins resulted in higher freight earnings with Panamax rates displaying the most prominent increases. The BDI today (24/11/2020) closed at 1,178 points, up by 9 point compared to Monday’s (23/11/2020) levels and increased by 66 points when compared to previous Tuesday’s closing (17/11/2020). Rates for the crude carrier units remain stuck at very unhealthy levels. Any resistance from owners quickly overlapped by the plethora of available tonnage across both basins; while improvements in some cases can hardly be translated as a breath for owners with T/C earnings hovering below OPEX levels. The BDTI (24/11/2020) closed at 447, an increase of 15 points, and the BCTI at 372, an increase of 27 point compared to previous Tuesday’s (17/11/2020) levels.
Sale & Purchase (Wet: Soft- / Dry: Firm+)
In the Secondhand market, a very small number of tanker deals concluded last week, with owner’s appetite focusing again on dry bulk units; among them, Supra/Ultramax sector gathered most of the interest. In the tanker sector, we had the sale of the “SELENE TRADER” (300,727dwt-blt ‘03, Japan), which was sold to Indonesian owner, Soechi Lines, for a price in the region of mid-high $23.0m. On the dry bulker side sector, we had the sale of the “LEDA” (82,165dwt-blt ‘13, Japan), which was sold to Greek owner, Bulk Seas, for a price in the region of $16.7m.
Newbuilding (Wet: Firm+ / Dry: Soft-)
The love for the crude carrier units has resumed in the Newbuilding realm with a healthy number of VLCC and Suezmax vessels coming to light during the last week. It seems that the newbuilding market has developed a strong resistance against the performance in the freight rates market. Despite the downward trend in the crude carrier earnings, owners are keen to take advantage of the relatively low prices, especially in the VLCC front with a total of 14 VLCC units being ordered this month so far. Among this list, Everest Korea Finance made the headlines with a sizeable order of 10 VLCC vessels across yards in S. Korea. On the other hand, activity in the dry bulk sector was low. In contrast to the previous week's increased activity on the Capesize front, last week, the absence of dry bulk orders comes as a reminder that the shipbuilding industry is still suffering from sluggish demand for bulker units.
Demolition (Wet: Stable+ / Dry: Stable+)
Once again, numbers are going higher in the demolition front with tonnage supply remaining at low levels forcing the Indian-subcontinent cash buyers to compete with each other by increasing their bids. Indeed, the high prices we have been witnessing over the past months have only been going higher; Pakistani breakers are still offering the highest average levels of around $380/ldt and $370/ldt for wet and dry bulk units respectively. In Bangladesh, it seems that the price settler cartel has finally, after 60 days, ceased its operation. It remains to be seen if Bangladeshi cash buyers will take the reins and get ahead as the top demo destination in the coming weeks. Indian local buyers have also increased their offered scrap prices on the back of improved steel plate prices and a stronger RS/USD exchange rate. Sentiment in the Turkish market remained steady, with no increases in scrap prices being materialized. Average prices in the different markets this week for tankers ranged between 215-380/ldt and those for dry bulk units between $205-370/ldt.
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