Synthetic fuels could be the answer to shipping’s net-zero goals, but don’t count on them yet
Shipping accounts for 90 percent of goods transported around the world, and it’s also the most energy-efficient mode of international freight transport. But it’s also a major source of global greenhouse gas emissions. Greener alternatives are often viewed as prohibitively expensive in a highly competitive market. And change is often desperately slow.
Today, international shipping accounts for 681 million tons of CO2 every year. While the sector is improving in terms of energy efficiency, emissions are likely to stay at about 600 megatons as seaborne trade is expected to grow by 15 percent by 2030. So, we’re going to look at the business case of synthetic shipping fuel as a technology fix to reduce carbon emissions.
Tankers: China is now the biggest oil importer in the world
China is now the single largest imported of crude oil globally. As such, the shift towards more Russian oil imports is a major change in the market. In its latest weekly report, shipbroker said that “the start of 2023 has been a positive period for crude oil trade, despite the high oil prices and mounting risks of economic recession. In Jan-Apt 2023, global crude oil loadings went up +9.4 percent y-o-y to 717.8 mln tonnes, excluding all cabotage trade, according to vessels tracking data from Refinitiv. This was well above the 656.0 mln tonnes in Jan-Apr 2022 and the 612.7 mln tonnes of Jan-Apr 2021, but also slightly above the 716.6 mln tonnes in the same period of 2020.
According to the shipbroker “exports from the Arabian Gulf were up +3.8 percent y-o-y to 290.5 mln t in JanApr 2023, and accounted for 40.5 percent of global seaborne crude oil trade. Exports from Russia have also increased by +7.2 percent y-o-y to 78.8 mln tonnes, or 11.0 percent of global trade.
Small bulkers lead S&P transactions in 2023
Smaller Bulkers have led bulker sale and purchase transactions so far this year, with a share of over half of all secondhand deals. Handy Bulkers made up the majority, accounting for c.31 percent of sales, and Supramaxes followed at c.25 percent. The average age of vessels sold in these categories are 13YO and 14YO respectively.
After a steady decline that followed the 12-year high seen in May 2022, values for both sectors have firmed since the start of the year. 10YO Supramax values for vessels of 60,000 DWT have firmed by c.7.5 percent from USD 21.48 mil to USD 23.09 mil. For Handy Bulkers of the same age, values have jumped by c.9.94 percent over the same period, from USD 15.49 mil to USD 17.03 mil.
Tanker trade facing years of disruption
The Tanker market is expected to remain a “minefield” of sanctions, cargo seizures and pipeline disrruption for the time being. In its latest weekly report, shipbroker said that “disruption to crude exports is nothing new, however recent geopolitical events have highlighted the precariousness of crude exports in some parts of the world, particularly where exports involve transiting another nation. In the past 12 months, disruptions have been observed on the Caspian Pipeline Consortium (CPC) and Kirkuk-Ceyhan pipelines, whilst unrest in Sudan threatens flows on the Greater Nile Pipeline”.
According to Gibson, “aside from its own crude production, Russia has the power to stop exports via the CPC pipeline, and some argue that Russia has already taken actions to disrupt CPC exports since the invasion of Ukraine. The terminal was forced to reduce exports to undergo repairs in August last year, whilst loadings were also disrupted in March and April 2022 due to suspected storm damage. Last June, operations were halted due to a search for unexploded ordinance.
Dry bulk market: capesizes faced lack of activity as the week ended
The Capes started the week on an upbeat note. All three majors were active in the market at the beginning of the week, resulting in a healthy volume of cargo from West Australia to China. As a result, rates pushed up accordingly, together with a positive paper market. Although by mid-week there was a feeling that the Pacific was looking a little toppy and sentiment shifted. This was also reflected in the paper market losing value. Rates began to diminish towards the end of the week, with a noticeable lack of activity. Brokers said that the supply of tonnage in the North Atlantic is tight and remained so during the week.
Looking ahead: the outlook for ammonia freight rates
As we approached the end of 2022, ammonia prices were at an all-time high and the market was enjoying a forward momentum that it seemed nothing could temper. High natural gas prices had forced production cutbacks, the war in Ukraine was causing further supply issues and success was coming easy to newcomers who found the market easy to make money in. But, with European natural gas prices having recently dropped below the average levels of 2021-2022, what can we expect to see happening to ammonia freight rates over the coming period.
The drive to decarbonise, and the important role which Japan has been playing is at the heart of this development. Japanese players have plenty of motivation to gain knowledge and experience in ammonia shipping.
Tanker market faced a downward correction in April
Dirty freight rates experienced a downward correction in April across all reported routes. Aframax saw the sharpest downturn, falling by as much as 66 percent on the Caribbean-to-US East Coast (USEC) route. Suezmax spot freight rates were next, with rates on the US Gulf Coast (USGC)-to-Europe route down 36 percent. VLCC rates also declined, down 24 percent on the Middle East-to-East route and 23 percent lower on the West Africato East route. Clean spot freight rates showed a mixed performance, with a weaker market West of Suez outweighing the strong performance East of Suez