By Lisa Baertlein
LOS ANGELES (Reuters) – Container shipping companies including Maersk, CMA CGM and COSCO have ordered hundreds of new ships in recent years, aimed at helping their industries cut greenhouse gas (GHG) emissions to meet rising demand from customers and regulators about the worldwide to meet.
However, their order books reflect uncertainty over which of a wide range of so-called green fuels will become the standard in the coming decades, and whether supplies will be cheap and plentiful enough to keep their fleets moving.
Decarbonizing shipping is important to global efforts to combat climate change because it is responsible for about 3% of global greenhouse gases. Achieving this will be difficult and expensive, requiring billions of dollars in investments in new ships and fuel production.
The UN’s International Maritime Organization has set a target of net-zero emissions from the shipping sector by 2050, but policymakers have so far provided little support or guidance on how companies should achieve that, leaving the future of the market remains a mystery.
“No single fuel or technology dominates,” said Knut Orbeck-Nilssen, CEO of Maritime at Norway-based ship certifier DNV.
Faced with that reality, the operators of the hulking ships that carry thousands of shipping boxes full of furniture, televisions, shoes and toys destined for companies like Walmart (NYSE:), Amazon (NASDAQ:), IKEA and Nike (NYSE:) are hedging their bets by ramping up orders for hybrid engines designed for different types of green fuels, but also allowing them to fall back on petroleum if those green fuels are unavailable or too expensive .
According to data from DNV, container shipping companies had pending orders for 522 new dual-fuel ships as of October 31. Of those, 303 are designed to run on liquefied gas (LNG), 216 are intended to burn methanol, two would use hydrogen and one would be equipped to use ammonia, according to the data.
Rebecca Galanopoulos, senior content analyst at maritime software and services provider Veson Nautical, said 65% of container ship orders in 2024 were for dual-fuel engines, up from just 4% in 2018.
“Major players in the shipping industry are busy making their fleets future-proof,” she says.
GOAL: REPLACE 2.5 BILLION OIL BARRELS
The maritime sector burns roughly 2.5 billion barrels of heavy fuel oil annually, made from the cheap leftovers from gasoline, diesel and jet fuel production.
According to the UN Conference on Trade and Development, decarbonizing the entire shipping sector could cost more than $100 billion a year and double the sector’s fuel prices.
Although the container shipping sector’s 6,643 ships make up a small share of the global fleet, they have an outsized impact on the climate because they travel faster and use more fuel than other ships, shipping experts say.
Container shipping companies are now at the forefront of the green trend and have ordered more than twice as many alternative fuel ships than any other freight sector, such as petroleum tankers or bulk carriers, according to DNV.
Most ships that run on conventional fossil fuels can now also run on biodiesel, made from used cooking oil, among other things. But supplies are expected to fall far short of what would be needed for the maritime industry.
CMA CGM, which Walmart considers a top customer, is among those that have secured some supplies. The company has been able to reduce CO2 emissions per container by 50% by using biodiesel, says Heather Wood, vice president of sustainability at the French airline.
At the same time, the company is adding biomethane, also called renewable natural gas, to its fuel mix.
“We’re moving in the right direction. It’s just going to be a portfolio of options,” said Wood, who added that CMA CGM is investing $15 billion in new ships that can run on a variety of cleaner fuels.
MORE GAS
Dual-fuel LNG ships now make up the majority of container ship orders. Despite being a fossil fuel, LNG can reduce greenhouse gas emissions by up to 23% because it burns cleaner than traditional marine fuels, DNV said.
Environmentalists and climate scientists, however, are far less enthusiastic because the production, transportation and use of LNG could lead to the leaking of methane, a powerful planet-warming gas, into the atmosphere. The same goes for renewable natural gas, extracted from decomposing animal and vegetable waste.
Switzerland’s MSC, a market leader with a fleet of more than 800 owned and chartered ships, says LNG has a relatively secure and reliable supply chain compared to other low-carbon marine fuels. And like most of its peers, the company has ordered dual-fuel LNG ships.
Germany’s Hapag-Lloyd earlier this year won a two-year contract to supply waste-based biomethane-powered shipping for the Zero Emission Maritime Buyers Alliance, which includes major shippers such as Amazon, IKEA and Nike.
Jo Friedmann, vice president of supply chain research at Rystad Energy, said transition fuels such as LNG “could play a pretty big role until 2035 or 2040.”
CARRIER ‘LEAN IN’
Meanwhile, executives are pushing for global regulations that would create greater certainty and promote investment in the green fuel market for decades to come.
They want global deadlines for phasing out polluting fuels, government incentives for the production and use of low-carbon fuels, and penalties for late adopters of cleaner fuels.
And several companies are investing in other alternative fuels such as green methanol and ammonia, hydrogen-based fuels produced using energy from renewable sources such as solar and wind energy.
CMA CGM, the Danish Maersk, the Taiwanese Evergreen and the Chinese COSCO are buying ships that can run on green methanol.
Meanwhile, COSCO and CMA CGM are working on a project to purchase, supply and deliver green methanol to major ports in China. And MSC is equipping an undisclosed portion of its new LNG ships with ammonia-compatible tanks.
“We can sit back and see which comes first, or you can opt for investments in green fuels,” Maersk CEO Vincent Clerc said earlier this year at the naming event in Los Angeles for one of its green methanol ships, Alette Maersk.
