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LNG is the most environmentally friendly fuel for shipping

LNG is the most environmentally friendly, readily available fuel for shipping today – and in the foreseeable future, according to a new study.

With the IMO’s 0.5% sulphur cap regulations coming into force next January, along with its target of halving C02 emissions from shipping by 2050, decisions need to be taken on alternative fuels.

At today’s launch in London of an independent study, commissioned by the not-for-profit collaborative industry foundation SEA/LNG, its chairman, Peter Keller, said the study aimed to prove the efficiency of LNG at this “challenging time for shipowners, operators and regulators”.

Mr Keller, also executive vice president of US flag line Tote, the first to operate LNG-fuelled containerships, said there had been “a significant amount of investment in LNG bunkering capabilities around the world”, a lack of which had in the past deterred most carriers from ordering LNG-fuelled vessels.

CMA CGM is the first, and so far only, global carrier to opt for LNG-fuelled ULCVS, with its order last year for nine 22,000 teu ships to be delivered next year.

Mr Keller conceded it was not viable to retrofit ships to run on LNG.

“Conversions are difficult,” he said, given the size of the tanks required and the complexity of the work.

Indeed, Hapag-Lloyd’s chairman, Rolf Habben Jansen, told The Loadstar recently that a ballpark figure for retrofitting one of its 17 so-called LNG-ready ULCVs, inherited from its merger with UASC, was $25m – at least four times the cost of installing a scrubber system.

He said only one of the 15,000 teu ships was being retrofitted to run on LNG, as a trial, and he did not expect this to be rolled out to the sister vessels.

The Well-to-Wake study (a well-established approach for assessing the life-cycle analysis of fuels used in ships) was undertaken by consultant thinkstep. Using testing and data in cooperation with engine manufacturers,it found that the use of LNG as a marine fuel showed GHG reductions of up to 21%, compared with current oil-based fuels for two-stroke slow-speed engines. These account for about 70% of the power units used in shipping.

Mr Keller admitted that LNG was not a final answer to cutting emissions from shipping, but “it is the only alternative fuel that is available now”.

Maersk said recently it had invested some $1bn in research and development on alternative fuels, which it said was being driven by its customers, the carrier having seen a 30% increase in tenders stipulating the use of sustainable fuel. Other options being researched include bio-diesel and ammonia (hydrogen), solar and wind power.

Source: The Loadstar

fuel increase

Why are fuel prices increasing?

Fuel prices are on the increase again, which is liable to have a considerable impact on the freight industry.

Fuel is now at its highest cost since 2014, and the main reasons for this are the war in Syria, Iranian tensions and biofuel for renewable energy increases.

As a result, pump prices and bunkering have increased and fuel surcharges are now coming into effect. Shipping lines are raising freight costs as the rising oil price lands them with spiralling fuel bills. This is likely to result in the the cost of imported goods rising.

Maersk, the world’s largest shipping business, has joined rival Mediterranean Shipping Co (MSC) in slapping a surcharge on freight costs to offset its own rising costs. MSC has also introduced a similar measure, telling customers the situation was an “emergency and no longer sustainable”. Maersk has also stated it would stop working with Iran as a consequence of the US introducing sanctions on the country, ending the its nascent business there.

Explaining the prices rises, MSC added: “Fuel prices are up more than 30pc this year, and almost 70pc since last June. [Ship fuel] prices in Europe exceeded $442 per metric ton last week. Crude oil is hovering around $80 a barrel — the highest since 2014.”

Warning its customers of higher charges, Maersk said the increase in ship fuel prices was “significantly higher than expected”, hitting $440 per ton.

Almost 90pc of the world’s good trade travels by sea, and the higher fuel costs are ultimately likely to be passed on to consumers, with other shipping lines following suit.

Since 2009, the price of a ton of bunker fuel from Asia to the US West and East and Gulf coasts has on average been 5.7 times greater than the price of a barrel of Brent crude oil. Assuming that multiplier and the IHS Markit forecast holds, the average cost for bunker fuel in 2017 should come to $330 per ton. Such an increase would raise the current BAF for 20-foot containers to $292 from $238 and to $324 from $264 for 40-foot boxes to the West Coast, according to the BAF surcharge calculator of the Transpacific Stabilization Agreement. To the East Coast, the BAF would rise to $537 from $473 for 20-footers and from $525 to $597 for 40-footers.

In order to address the trend in increasing fuel costs over the last decade, most shipping companies began restructuring their operations to create fuel efficiencies:

  • Consolidated services through multi-carrier alliances.
  • Consolidated routes to serve more locations with fewer ships.
  • Improved monitoring of hull and propeller conditions to reduce resistance and improve efficiency.

These actions have helped carriers reduce fuel consumption, and consequently, their fuel costs. However the challenge of rising fuel prices in 2018 is even greater than ever and the outlook is challenging for shipping companies and freight forwarders alike.

To add to the pressure, analysts predict that there is the possibility that shipping fuel costs could rise by as much as a quarter in 2020 when new rules limiting sulphur kick in. Today Emission Control Areas restrict the Sulphur Limit for fuel oil used by ships but the Emission Control areas are restricted to coastal areas in Europe and the US and Canada. Under the new global cap the reduced Sulphur Limit is imposed in all global waters. The predicted cost increase will come as the change to ultra low sulphur fuel oil comes at a much higher cost based on todays market.

Beyond rising costs, higher bunker prices are problematic for container lines because of the delay between when fuel prices rise and when the container lines are able to pass those increases off to customers. This means container lines must spend billions of dollars on more expensive fuel without necessarily having the funding needed to offset the increase, according to maritime analyst SeaIntel.

Source: Telegraph / pfe-express.com / JOC.com