Table of Contents
How Green is Green?
Green methanol is often touted as one of the leading alternative sustainable fuels for the maritime sector. It is relatively easy to produce, most ports around the world can handle it, and being liquid at ambient temperature, it is cheaper to store than other alternative fuels like LNG or Ammonia which require cryogenic tanks. Nevertheless, it’s important to also evaluate its competitiveness against conventional fuels. Given the rising interest in alternative dual fuel vessels, green methanol’s adoption will inevitably encounter competition primarily from traditional hydrocarbon-based fuels. Rather unsurprisingly it doesn’t fare well in comparison with MGO from an energy density perspective; the energy density of methanol is 15.8 GJ/m3 whereas that of MGO is 36.6 GJ/m3, consequently methanol requires 2.4 times more space on board than its conventional counterpart.
In addition to requiring more space on-board, green methanol is expensive when compared to VLSFO. Green methanol priced on a VLSFO equivalent basis is currently 4-5 times more expensive. This gap may be bridged by an increase in green methanol supply and higher carbon prices. Despite these current challenges, the medium to long-term outlook for green methanol is promising. With a significant surge in supply expected post-2025, driven by the establishment of several new production facilities and the expected increase in both the scope and pricing of carbon allowances, the economics of green methanol are likely to improve over time.
However, it is essential to acknowledge that green methanol is not carbon-free; CO2 emissions still occur upon combustion. Consequently, a CO2 multiplier of 1.375 must be applied compared to VLSFO’s 3.151. Overall methanol offers a 7-10% reduction in emissions (tank to wake basis) versus VLSFO. However, these savings in ETS offsetting requirements are eroded by higher bunker costs and currently only impact ships trading with Europe. Nevertheless, it offers significant environmental advantages, with a 99% reduction in SOX and a 60% reduction in NOX emissions.
For the methanol-fuelled fleet, box carriers reign supreme. More than 100 methanol fuelled container ships are slated to set sail by 2028, with a growing number of tankers and bulkers following suit. Additionally, a notable shift in newbuild ordering of dual-fuel ships is evident in the orderbook of vessels exceeding 25,000 dwt. From 2025 onwards, many newly commissioned ships will have dual-fuel capabilities, offering them the option to operate on a range of more sustainable fuels. This trend towards sustainable shipping underscores methanol’s position as a current frontrunner amongst other future fuels.
When considering cost-effectiveness, green methanol emerges as a competitive option compared to other future-ready fuels such as ammonia and LNG, particularly from a CAPEX perspective. However, in terms of emissions, it isn’t as green as the name suggests. Thus, there’s a delicate balance to achieve; green methanol is a practical means to lower emissions today but does not eradicate them entirely.
Dual Fuel Orderbook (No. of Vessels)
Crude Oil
Middle East
The good times are back for VLCC Owners as rates approach the ws 100 mark as a crowded field of Charterers chased too few ships for the end of February and early March stems which pushed rates up to yearly highs. It remains to be seen if this carries over into next week but in the short term it looks like we could see another hike before we hit the top of this current cycle. Today we are calling a 270,000mt AG/China run at ws 92.5 and a 280,000mt AG/USG run remains at ws 55.
The AG tonnage list has thinned out throughout the week on the Suezmaxes, rates are steady and there is optimism in the air. Rates stand around 140,000mt x ws 75 for BOT/UKCM via the Cape. To head East there is still ample tonnage and rates are approximately 130,000mt x ws 125 today for AG/East.
Sentiment has shifted towards the softer side this week with AG/East dropping around 5 points. This is due to a handful of ships willing to head East and a big downward slope in the Indo region, encouraging some Owners to make the ballast across. The list remains relatively tight for third decade with some Charterers already looking into March liftings. We finish the week at 80,000mt x w190 for a TD8 run.
West Africa
The market here was not as active as the AG but there was enough enquiry for 2nd decade March combined with momentum from the East to push rates up to very firm levels and Owner’s sentiment is strong enough to keep rates on the current upwards trajectory for the time being. Today we are expecting a WAF/China run to fix at the ws 87.5 level.
Suezmax markets in West Africa are firm, with ws 112.5 paid for a run not loading in Nigeria and a healthy market across the Atlantic. For TD20 today, we estimate this at 130,000mt x ws 115. Rates to head East are at parity.
Mediterranean
The market for TD6 is approximately 135,000mt x ws 132.5 but with stems covered a little way ahead, there isn’t much enquiry to test the market. Cargoes heading East from the Med still don’t seem to have exhausted the vessels willing to head via Suez and rates are around $7.3M for Libya/Ningbo via the Cape.
The Med Aframax market has been stripped of tonnage this week and as a result, rates have continued to push upwards. We close the week at ws 200 levels for an X-Med run with Owners remaining bullish. Charterers will hope that itinerary’s firm up over the weekend to add a few more ships to the list, but as we look ahead to next week, Owners are very much in the driving seat as we move into the March fixing window.
US Gulf/Latin America
This area has not been as dominant as usual in setting the tone for the VLCC market as we even saw a dip in rates in the middle of the week. However, it now appears momentum is building on the back of the boom elsewhere and a release of last decade stems should ensure we see rates move upwards accordingly. Brazil exports also appears to be firming with a good volume for mid-month stems and today we expect a USG/China run will fix in the region of just $10.2M in today’s market while a Brazil/China run is paying around the ws 85 level.
North Sea
Despite some more action from surrounding regions, there has been crablike movement in the North. Sentiment remains tricky with some looking at Med returns and weighing up the ballast. Despite some bad weather and strikes, delays have had little effect on rates, we see the market sticking in the ws 160s into next week.
Crude Tanker Spot Rates (WS)
Clean Products
East
It was a week of negative adjustment on freight from the Middle East. Chinese New Year shouldn’t directly attribute to a slowdown in quoted volume, but rather poses Charterers with a nice opportunity to sit on enquiry and let freight expectations go down. LR2s have softened to $6.5m (Cape routed) – seven offers on this cargo highlights the level of competition on the tonnage list. TC1 needs a fresh test given the drop in earnings – 75,000mt x ws 250 basis Japan should be achievable now or beatable at a push.
LR1s are incredibly short on volume here with circa 25 on the count for second half month dates. TC5 fixed several times at Platts which could be some bizarre gambling from Naphtha traders if we experience an expected shortfall in cargoes coming through next week. Physical freight is trading at 55,000mt x ws 250 which feels very close to the bottom. There might be one or two cheap deals to come before a bounce. For Westbound, on an earnings perspective, this should trade at $5.8m via Cape, but whether we see $5.5m levels from an Owner looking to lock in is a test for next week.
Important side notes to consider is that the Dangote refinery has put its first export cargo into the market, an LR1 Naphtha cargo, which will not be required locally. We all await further information on export quotas but this is an interesting alternative for LRs routed via Cape. Important also to note that the Far East comes back online next week post Chinese New Year and a tight North Asian LR1 list and a tightening LR2 list despite the holidays suggests we might have an interesting week.
It was a difficult week for the MRs with over 100pts lost on EAFR runs (down from 47k/day to 32k/day) and 300k on X-AGs. The writing was on the wall however with over 30 ballasters/prompt ships load ready basis Fujairah for 2 weeks out, with plenty of relets in that collection. The back end of the week has seen a little more activity which gives hope that we’re slowly reaching the bottom of this slide but expect to see a little more off first before a potential bounce.
For Far East MRs, the major holiday resulted in less cargo and the market corrected down accordingly. In the North, the benchmark Korea/Spore route dropped 150k to $1.35m but Korea/OZ only dipped 5 points to ws 370. The bad weather caused some delay and helped push back the ships open date. The Singapore area has seen a very quiet week. Very few deals or rates were reported. TC7 went down 15 points to ws 335. Several ships were fixed with North loading cargo which gave better earnings. With the AG collapsing, less owners would choose to ballast in that direction.
Mediterranean
All in all, it’s been a positive week for the Handies here in the Mediterranean with good cargo enquiry seen for the majority. For the best part of the week, rates held at the 30 x ws 270 mark for X-Med but with the list growing ever-thinner, were able to jump 10 points by Thursday afternoon. Fast-forward to Friday we see little left to cover but with the front-end still tight Owners have been able to stand their ground at 30 x ws 280. Expect a replenishment of tonnage come Monday.
Finally, to the Med MR’s where it’s been a good week for Owners with rates jumping from the opening of play. We closed week 6 with Med/TA trading at the 37 x ws 235 mark but with a prompt NAP stem needing cover on Monday we soon saw rates spike with 37 x ws 275 seen for Sines/UKC. This heightened Owners ideas for vanilla runs with 37 x ws 265 on subs Med/TA as well as 37 x ws 280 for a Med/UKC replacement. At the time of writing rates seem to have settled at 37 x ws 260 Med/TA and with little outstanding, expect this to hold into the weekend.
UK Continent
We saw a strong start to the week as momentum continued to flow from last Friday and rates continued to flourish with TC2 rising to the 37 x ws 255 mark. This though seemed to scare off a few Charterers / Cargoes and since then the market has ground to halt with limited market enquiry and a few sneaky stems are clipped out to keep a lid on Owner’s excitement. Come Friday we see WAF tested at 37 x ws 260 and can assume next done TC2 to be somewhere around the ws240 mark, well at least that’s what Charterers will be aiming for. Options should open up a touch for Charterers come the mid-20s window but with an active USG market seeing some improvements, we note a few ballasters from the USAC region setting sail South in search of better returns which will hinder the replenishment of our UKC list.
Off the back of the above excitement, we saw the UKC Handy sector also flourish in the first half of this week with rates picking up 50 points to the 30 x ws 270 mark. But once again it seems this put off many Charterers and a slower end to the week has let a little steam come off this market. A couple of fresh tests on Friday sees 30 x ws 250 being achieved and with minimal outstanding, a chance for further decline is plausible.
Clean Tanker Spot Rates (WS)
Dirty Products
Handy
Charterers had limited options throughout the week in the Continent as the list remained favourable to Owners. There was speculation about a significant rise above last done levels, however unfortunately for Owners, a lack of fresh enquiry for most of the week hindered those in position from capitalising on firm sentiment. Furthermore, one owner fixed 30 x ws 342.5 for Brofjorden/UKC, which has left questions about whether this level can be repeated, or whether Owners can separate this fixture as an outlier.
In the Med, Owners will be pleased with the activity level seen in the latter half of the week after levels dropped to ws 300 on Monday. With a general pickup in activity, levels soon found their floor as repetition began, and as we look forward to week 8, upcoming tonnage in Med should keep conditions balanced to begin with.
MR
A disappointing week for MRs in the North after tight positioning and slow replenishment left Owners feeling optimistic. However, full stem enquiry failed to surface leaving this sector feeling pretty flat. Expect Owners will now also seek coverage based on 30kt as a time filler.
In the Med, Owners should feel positive after a successful week of activity, both full and part cargo. The list has now tightened further, which puts Owners in a good position should we see minimal replenishment over the weekend to push levels further than ws 232.5 (last done).
Panamax
It was a frustrating week for the Panamax’s after one Owner failed their subs early in the week. The feeling remains that levels will still hold at ws 190, but flat enquiry this week has left this sector needing a fresh test to see whether levels will hold or if gaps in availability will see a rise once again. However, one thing to note is with the States market still providing better employment opportunities, Owners who have tonnage this side of the Atlantic will not hesitate to ballast West if enquiry fails to surface again next week.
Dirty Product Tanker Spot Rates (WS)
Rates & Bunkers
Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)
wk on wk change | Feb 15th | Feb 8th | Last Month* | FFA Q1 | |
TD3C VLCC AG-China WS | +23 | 89 | 66 | 66 | 72 |
TD3C VLCC AG-China TCE $/day | +28,750 | 67,000 | 38,250 | 40,000 | 46,250 |
TD20 Suezmax WAF-UKC WS | +11 | 114 | 103 | 143 | 121 |
TD20 Suezmax WAF-UKC TCE $/day | +6,250 | 41,000 | 34,750 | 61,000 | 46,000 |
TD25 Aframax USG-UKC WS | +19 | 211 | 192 | 237 | 216 |
TD25 Aframax USG-UKC TCE $/day | +7,000 | 51,500 | 44,500 | 62,250 | 53,750 |
TC1 LR2 AG-Japan WS | -15 | 247 | 262 | 201 | |
TC1 LR2 AG-Japan TCE $/day | -5,750 | 62,750 | 68,500 | 47,500 | |
TC18 MR USG-Brazil WS | +26 | 260 | 234 | 219 | 226 |
TC18 MR USG-Brazil TCE $/day | +5,000 | 31,250 | 26,250 | 24,750 | 24,500 |
TC5 LR1 AG-Japan WS | -60 | 246 | 296 | 254 | 254 |
TC5 LR1 AG-Japan TCE $/day | -13,250 | 43,500 | 56,750 | 46,750 | 45,750 |
TC7 MR Singapore-EC Aus WS | -10 | 333 | 343 | 289 | 287 |
TC7 MR Singapore-EC Aus TCE $/day | -2,000 | 40,750 | 42,750 | 33,750 | 32,750 |
(a) based on round voyage economics at ‘market’ speed, non eco, non scrubber basis
Bunker Price s ($/tonne)
wk on wk change | Feb 15th | Feb 8th | Last Month* | |
Rotterdam VLSFO | +3 | 568 | 565 | 542 |
Fujairah VLSFO | +0 | 609 | 609 | 590 |
Singapore VLSFO | +7 | 637 | 630 | 606 |
Rotterdam LSMGO | -8 | 793 | 801 | 740 |
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