South Korean shipbuilder bets on methanol-powered vessels in decarbonisation push
One of the world’s biggest shipbuilders expects orders for methanol-powered ships to surge in the coming decades, as tougher environmental regulations intensify a push to use alternative fuel sources.
The bullish forecast by Korea Shipbuilding & Offshore Engineering comes as the company accelerates away from fossil fuels and competition with Chinese rivals intensifies.
“Orders for methanol-fuelled ships will increase sharply for more than 10 years, although LNG [liquefied natural gas] burning ships will remain the mainstream for the next two decades,” chief executive Ka Sam-hyun told the Financial Times in an interview.
Analysts expect about 50 methanol dual-fuelled vessels to be ordered worldwide before the end of this year as shipowners in Asia and Europe replace older container fleets. That compares with orders for 19 methanol dual-fuelled vessels placed last year.
The shipping industry is under increasing pressure to decarbonise as the International Maritime Organisation works to cut greenhouse gas emissions from ships at least 50 per cent by 2050, compared with 2008 levels.
With global shipping responsible for 90 per cent of world trade, the industry accounts for 3-4 per cent of global greenhouse gas emissions, roughly equivalent to Germany’s annual emissions, according to Longspur Capital.
Competition to grab a bigger share of the nascent market is intensifying between South Korea and China. Building a dual-fuelled methanol vessel is cheaper than one designed to use LNG, due to technological advances and because methanol does not require expensive cryogenic bunker tanks and fuel gas handling systems.
AP Møller-Maersk, the world’s biggest container shipping company, has ordered 12 methanol-powered container ships worth $2.2bn from KSOE to be delivered starting in 2024. In June, it floated a tender with shipyards for more ships operating on methanol.
French shipping company CMA CGM has also placed a series of orders for methanol dual-fuel container ships worth about $1bn in total with China’s Dalian Shipbuilding Industry.
“You cannot replace all fleets with only clean fuel by 2040. LNG is a transitional option but it will last for another generation, given the limited supply of methanol,” said Ka.
“Ammonia is toxic and still too expensive. Eventually, we should move towards hydrogen ships and electric-motor ships, but it is still too far off.”
LNG has been widely used as an alternative fuel for shipping companies, but methanol is gaining interest among shipbuilders. KSOE has won orders to build 29 methanol-fuelled ships.
But analysts said there was a limit to how much methanol-fuelled fleets can be expanded.
“Shipowners are looking for alternative fuel sources other than LNG that can reduce carbon emissions further,” said Yang Jong-seo, a researcher at the Export-Import Bank of Korea. “But it is difficult to secure a large quantity of methanol to fuel ships and they still need to perfect the carbon capture and storage technology.”
Yang added that developing eco-friendly shipbuilding technology was essential for Korean shipyards to stave off increasing competition from low-cost Chinese rivals.
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