Shippers now preferring green methanol to cut emissions

Container shippers are ordering vessels powered by methanol to reduce greenhouse gas emissions, but it will take years for renewable methanol output to meet demand and for costs to fall.

The first green methanol-fuelled container ship, owned by A.P. Moller-Maersk, sailed from South Korea in July. The number of such vessels is expected to exceed 200 by 2028, up from 30 this year, consultancy DNV forecasts.

Container giants such as A.P. Moller-Maersk, CMA CGM and XpressFeeders dominate the order books. They ship consumer goods for companies including Apple, Nike, Adidas and Walmart and are betting on methanol, as well as exploring other less developed options such as ammonia, to meet their own and clients’ emission reduction targets.

Maersk said methanol-powered ships with dual-fuel options cost about 10%-12% more than conventional ships, but the price difference should become insignificant in the longer run once developers achieve economies of scale.

The challenges of delivering enough fuel, however, are considerable and emissions will not be entirely eliminated.

Conventional methanol emits up to 80% less nitrogen oxides and cuts nearly 99% of sulphur oxide emissions versus fuel oil, but it still emits planet-warming carbon dioxide.

Using methanol, produced either from biomass or captured carbon and hydrogen from renewable power, can reduce carbon dioxide emissions from container ships by 60% to 95% compared with conventional fuels, the Methanol Institute said.

But green methanol, produced from biomass or captured carbon and hydrogen from renewable power, is scarce and costs at least twice as much as conventional methanol, produced from fossil fuel, industry insiders say.

The renewable fuel’s production is also far from the bunkering hubs, where ships refuel, meaning additional costs in terms of money and emissions for transportation, they added.

Global demand for methanol, typically used in construction and manufacturing, stands at 100 million tonnes per year (tpy), while a 16,000-TEU container ship consumes 30,000 to 40,000 tpy, the Methanol Institute said.

Methanol demand could grow by a further 6-to-8 million tonnes per year in 2028, based on Reuters calculations and the vessels on order.

However, bio-methanol provides less than 1% of global production, at between 300,000 and 400,000 tonnes as of last year, according to the Methanol Institute, which means ships for now must rely mainly on more conventional fuels.

Shippers hope that their investments in methanol-fuelled ships will spur production of the renewable fuel and lower costs in the long run.

Netherlands-based OCI, which supplied green methanol to Maersk’s first ship, can produce up to 200,000 tpy of the renewable fuel.

Most green methanol projects are located in China, northern Europe and North America – far from major bunker hubs Singapore and the United Arab Emirates, creating a logistical gap.

Costs will come down as production increases over the next 15-to-20 years from less than 1% of output now, said Anita Gajadhar, Proman’s executive director for marketing, logistics and shipping, adding that more countries, such as Chile and Argentina, have potential to make green methanol.

Within Asia, South Korea and China are set to increase their capacity to fuel ships with green methanol.

Maersk has set itself a goal to use low-emission fuels to transport a quarter of its volumes by 2030.

Tags: Emissions, Green Methanol, Shippers