One of the world’s biggest shipbuilders expects orders for methanol-powered ships to surge in the coming decades, as tougher environmental regulations intensify a push to use alternative fuel sources.
The bullish forecast by Korea Shipbuilding & Offshore Engineering comes as the company accelerates away from fossil fuels and competition with Chinese rivals intensifies.
“Orders for methanol-fuelled ships will increase sharply for more than 10 years, although LNG [liquefied natural gas] burning ships will remain the mainstream for the next two decades,” chief executive Ka Sam-hyun told the Financial Times in an interview.
Analysts anticipate that 50 methanol-fuelled vessels will be ordered globally before the year’s end as shipowners from Asia and Europe replace old container fleets. This compares to 19 methanol dual fuelled vessels ordered last year.
As the International Maritime Organisation aims to reduce greenhouse gas emissions from ships by at least 50% by 2050, compared to 2008 levels, pressure is growing on the shipping industry to decarbonise.
With global shipping responsible for 90 per cent of world trade, the industry accounts for 3-4 per cent of global greenhouse gas emissions, roughly equivalent to Germany’s annual emissions, according to Longspur Capital.
South Korea and China are battling for a larger share of this emerging market. Due to technological advances, building a dual-fuelled vessel for methanol is cheaper than building one for LNG. Methanol also doesn’t require expensive cryogenic bunker tanks or fuel gas handling systems.
AP Møller-Maersk, the world’s biggest container shipping company, has ordered 12 methanol-powered container ships worth $2.2bn from KSOE to be delivered starting in 2024. In June, it submitted a tender to shipyards for additional ships powered by methanol.
French shipping company CMA CGM has also placed a series of orders for methanol dual-fuel container ships worth about $1bn in total with China’s Dalian Shipbuilding Industry.
“You cannot replace all fleets with only clean fuel by 2040. LNG is a transitional option but it will last for another generation, given the limited supply of methanol,” said Ka.
“Ammonia is toxic and still too expensive. Eventually, we should move towards hydrogen ships and electric-motor ships, but it is still too far off.”
While LNG has been widely utilized as an alternative fuel for shipping companies in the past, shipbuilders are now interested in methanol. KSOE has been awarded orders to build 29 methanol-fueled ships.
Analysts say there is a limit to the expansion of methanol-fuelled vehicles.
“Shipowners are looking for alternative fuel sources other than LNG that can reduce carbon emissions further,” said Yang Jong-seo, a researcher at the Export-Import Bank of Korea. “But it is difficult to secure a large quantity of methanol to fuel ships and they still need to perfect the carbon capture and storage technology.”
Yang said that Korean shipyards need to develop eco-friendly shipbuilding technology in order to resist increasing competition from low-cost Chinese counterparts.
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