Methanol is rapidly growing in prominence as an alternative bunker fuel, but is the bunker industry ready for methanol-fuelled shipping?
The global methanol-fuelled fleet is made up of 50 vessels, with another 310 expected to join the fleet by 2028, according to data from classification society DNV.
Methanol-fuelled ships took up 166 of the 515 orders of ships capable of running on alternative fuels last year.
With this influx of ships requiring methanol due to hit the market over the next three years, the bunker industry needs to ask itself whether it has prepared adequately for this alternative fuel.
Most methanol-fuelled ships ordered thus far have been ordered by the container lines, often with their own direct contractual arrangements with methanol producers.
This arrangement is unlikely to last long, as methanol producers are unlikely to want to be in the business of last-mile delivery of their product to the shipping industry in the longer term as demand scales up.
The bunker industry will need to fill the gap, acting in its traditional role as intermediary between producers and end-users.
To do so, it will first need to determine where demand is most likely to emerge.
For now, the safest bet would be to look at the largest hubs; Singapore and Rotterdam will be the most likely places for demand to emerge at scale in the short term.
Bunker suppliers with cash to invest can look at investing in chemical tankers for methanol bunker delivery at these ports. These tankers will also be able to hold biofuel blends up to B100, meaning suppliers will be able to use these ships for biofuel blend deliveries until methanol demand grows more rapidly. Some suppliers in Singapore are already in the process of deploying chemical tankers in this way.
The next step may be securing supply, finding producers close to the largest ports producing green methanol at the lowest cost.
This will be an increasingly complex challenge in the coming years as other industries will also seek to secure access to green methanol supply. The aviation fuel industry in particular is likely to be a significant competitor.
Finally, bunker suppliers will need to determine how best to make supply and demand meet over the long term while keeping costs low.
To do this, the easiest route is likely to be driving uptake of long-term contracts where possible.
Shipowners with methanol-fuelled tonnage will need reliable supply of methanol at relevant ports around the world, and green methanol producers will want guaranteed offtake of their product to recoup their investment in production facilities.
Eventually a mature spot market is likely to emerge for methanol as a bunker fuel, once sufficient demand levels are guaranteed and supply at key ports feels more reliable. But in the interim, the bunker industry’s role will be to help facilitate multi-year supply contracts between producers and buyers of methanol as a bunker fuel, ensuring both sides of the market have sufficient guarantees of liquidity in the market to put their investments on a sure footing.
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For further insights and personalized assistance, contact our New Fuels Advisors stationed at key hubs around the world. They are equipped with the latest knowledge and tools to help navigate regulatory changes, fuel availability and the best solutions for your fleet. Email newfuels@gibunkering.com for expert guidance on making a seamless shift to new fuels.
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