Methanol could become the preferred fuel for new vessels already in 2023
21 Mar 2023
Carriers preferred methanol when ordering new green vessels in 2023. The fuel could overtake LNG already this year, DNV estimates.
Methanol could pass liquified natural gas (LNG) as the most popular fuel for new vessels already in the current year.
Such is the assessment from classification society DNV, following a surge of new order for newbuilds capable of sailing on methanol.”It is very hard to say if or when methanol orders will be higher than for LNG, but it could happen also in 2023,” says Christos Chryssakis, business development manager at DNV.
In the first two months of the year, there were orders for 24 newbuilds across segments able to sail on methanol once finished at the shipyard.
By comparison, there have only been orders for 10 LNG newbuilds, according to data from DNV.
When looking at the compiled number of ships at sea and in yards’ order books, there is still far more LNG-compatible ships than methanol-compatible ones. The development in 2023, however, shows methanol making headway, estimates numerous observers.
DNV expects both fuel types to remain popular when carriers order new vessels, as each type has its pros and cons.
”LNG offers immediate reduction of GHG, even when fossil LNG is used, at the expense of a higher capital investment. Building a methanol fuelled vessel is less expensive, but green methanol will be needed sooner than green LNG and there is currently high uncertainty on future availability and prices,” explains Martin Wold, chief consultant at DNV Maritime Business Advisory, in relation to the publication of a new report.
Big orders inbound.
Lately, a slew of major carriers have ramped up orders for methanol vessels.
South Korea’s largest carrier, HMM, ordered nine container vessels in mid-February. These will be capable of sailing by means of methanol and regular fuel alike. HMM’s investment amounts to USD 1.1bn.
The brokerage house Braemar writes in an analysis that HMM’s order indicates that methanol is heading for the lead position within alternative fuels for container liners that have increased their respective climate targets in recent years.
Braemar also notes that the liners usually collaborate with fuel suppliers, adding incentive for energy companies to invest in production as well.
Methanol grows in popularity
There were a compiled 106 methanol ships delivered and ordered by the end of February 2023.
By mid-March, Japanese carrier ONE also ordered ten container vessels with dual compatibility for green fuels: methanol and ammonia, which many believe will become the two dominant sources in coming years.
The vessels were added to an existing order of ten vessels from May 2022.
French carrier CMA CGM has been rumored to have ordered multiple methanol vessels, bringing the company’s order book up to 18 vessels that can sail on the green fuel.
Danish Maersk was the first major carrier to bet big on the fuel. The group has 19 methanol vessels in order books.
Not yet fully green
There are several factors as to why methanol might surpass LNG as carriers’ preferred alternative fuel.
First of all, LNG is essentially a fossil fuel and thus considered a transitional fuel by many.
According to DNV, it is furthermore easier and cheaper to build a methanol ship compared to a vessel sailing on LNG, ammonia or hydrogen.
Chryssakis highlights one thing, though.
”When referring to green fuels, it is important to keep in mind that methanol today is produced from natural gas and therefore is not green,” he says and adds:
”Shipowners who order methanol-fueled ships are currently trying to source green methanol, with production estimated to start with small volumes in 2025 and increase towards 2030.”
This means that when Maersk’s first methanol-powered container ship becomes operational, it probably won’t sail on green methanol exclusively.
Procuring green methanol is no easy task, and Maersk has therefore entered several partnerships around the world in order to secure sufficient supplies.
DNV expects the availability of green methanol to improve from 2030 and onwards.
(source: Methanol could become the preferred fuel for new vessels already in 2023 — ShippingWatch)