Chemicals, Agriculture, Energy Transition, Maritime & Shipping, Biofuel, Renewables
December 16, 2024
Low-carbon methanol markets gear up for FuelEU Maritime regulation
HIGHLIGHTS
Challenges include low supply, high prices
Biofuels, LNG expected to meet FuelEU Maritime's 2% GHG reduction target
China becomes leader in low-carbon methanol production
Supply and price concerns will dominate the low-carbon methanol market in 2025, particularly in Europe, as the FuelEU Maritime regulation kicks off at the start of the year.
The new rule stipulates the greenhouse gas intensity of fuels used by the shipping sector will have to drop by 2% to 89.34 gCO2e/MJ from 2025 to 2029. The modest requirement, however, will likely fail to encourage the adoption of low-carbon methanol in the short term, with the EU's current bunker fuels mix, namely biofuels and LNG, able to cover 90% of 2025 requirements, according to the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping.
It has become what a source called a "chicken-and-egg dilemma," where a lack of availability, partially due to restricted feedstock supply, keeps prices elevated for low-carbon methanol. This limits consumer interest in signing offtake agreements and, ultimately, hinders producers from scaling up operations.
"The premium for low-carbon methanol options remains a significant hurdle for the market," a trader said, adding eMethanol, in particular, costs around four or five times as much as conventional methanol.
The Platts FOB Rotterdam eMethanol price averaged $2,168/mt through November in 2024, S&P Global Commodity Insights data showed.
"I see a few projects being announced, some even being constructed, but I see just as many projects being cancelled," a methanol distributor said. "There are bio-methanol projects being scrapped in Italy, for example."
Commodity Insights estimates low-carbon methanol production will reach 1.4 million mt by 2028 and 1.7 million mt by 2030.
Brazil: Americas' bunkering potential
The Americas low-carbon methanol marine fuel market will monitor European regulations throughout the first half 2025, particularly those stipulated by FuelEU Maritime surrounding the use of low-carbon bunkers, while also awaiting the International Maritime Organization's decision on the quantum for carbon levies for shipping in April 2025.
"Brazil has potential for methanol bunkering," said a South American producer, citing lower costs and shorter lead times on the Atlantic Coast as factors that make it "an attractive prospect."
However, sustainable methanol "might not be the solution" for decarbonizing the shipping industry, according to a shipbroker, who said the industry needs further development for the fuel to become a competitively priced alternative.
"There is more interest in doing that with ammonia because ammonia will be widely used by other industries, not only shipping," the source said.
The source added that dual-fueled ships will be important for ease of adoption, and ships capable of running on three fuels would be "rough on capex," but would importantly offer "more flexibility."
The Platts Houston delivered carbon-accounted methanol marine fuel price, launched June 13, averaged $1,056/mt through November.
China trailblazing low-carbon methanol production
China has emerged as a leader in producing low-carbon methanol over Indonesia, India, Australia and the Middle East in the short to medium term.
The Hong Kong and China Gas Company (Towngas), the first Chinese company to receive ISCC EU and ISCC PLUS certifications for green methanol, is expected to reach output of 150,000 mt/year in 2025 at its plant in Ordos, Inner Mongolia.
Hong Kong-headquartered Chimbusco Pan Nation Petro-chemical inked an agreement with Towngas in November to distribute low-carbon methanol bunkers to its customers. The memorandum of understanding was signed after Hong Kong announced an action plan to become a green bunkering center with a target to have 7% of its registered ships using green marine fuels by 2030, among other initiatives.
Chinese wind turbine maker Goldwind Green Energy Chemicals has signed a multiyear offtake agreement with Danish container line A.P. Moller-Maersk to supply 500,000 mt/year of bio- and e-methanol from 2026 into the next decade.
In Singapore, the Maritime and Port Authority is expected to release its technical reference for methanol bunkering by Q1 2025 in preparation for the supply of methanol bunkers in the city-state. Singapore has three methanol bunker barges with six more to be delivered from late-2024 into 2025.
Platts, part of S&P Global Commodity Insights, on Nov. 11 launched two Singapore delivered low-carbon methanol marine fuel price assessments. Prices for methanol with a carbon intensity of not more than 32.9 gCO2e/MJ were in a range of $1,010-$1,015/mt in November, while methanol bunkers with a carbon intensity of maximum 90 gCO2e/MJ were in a range of $522-$523.80/mt.
Chemical Trends H1 2025
This feature is part of our bi-annual report analyzing the biggest themes and trends that will dominate chemicals markets in the year ahead. Explore more features below, or to read articles looking at the year ahead for a wider range of chemical markets, visit Platts Connect
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