News / Shipping lines should buy fuel collectively to clear a path to 'green' target

Image made by The Loadstar using Dall-E

Enhanced alignment between shipping and fuel producers is essential if the industry is to meet its 2050 climate goals.

At an IMO-affiliated event in London this week, the director of sustainable fuels and strategy at the Lloyd’s Register Decarbonisation Hub, Carlo Raucci, said that “for obvious reasons” fuel adoption was key to addressing the sector’s environmental goals.

“From where we stand, one of the main barriers is the lack of alignment in incentives for carriers and fuel producers.

“When it comes to fuel, shipping lines want to strike agreements for three-year deals, but given the necessary investment in development required for green fuels, the producers are seeking 10-year deals – the risk-sharing is misaligned.”

To address this, Dr Raucci suggested, the clearest route would be mobilising carriers to strike collective agreements for green fuel acquisition.

This, however, comes up against a variety of hurdles, not least the major divergence among carriers over which green fuel to opt for – ammonia, methanol, or LNG – with some lines even second-guessing themselves (Maersk backtracking with an order for 12 LNG ships).

Decarb Hub MD James Forsdyke said part of the problem was that implementation costs mattered as much as the dollar cost, “and this can differ from carrier to carrier”.

He told The Loadstar: “You have to consider the composition of carriers’ fleets, so for one age bracket or ship type you may choose a different fuel type to that you would choose for either a vessel you are retrofitting or one you are designing now.

“For this reason, we are not so sure about a top-down imposition of fuel choice; we believe the best option is to leave industry to follow the evidence and to coalesce around one [type].”

But even if carriers were able to achieve concord on the type of fuel they would use to meet the 2050 climate commitments, Mr Forsdyke noted that work would still be required to ensure fuel producers and shipping lines were better aligned around the risk-sharing of uptake.

And this, he said, would necessitate something of a major mentality reset from the carrier side around purchasing practices.

“It is not the case that carriers are not speaking to one another about which fuel type to go for, rather the issue surrounds the notion of collective purchasing power, which is not something ocean liners have historically done,” explained Mr Forsdyke.

“In fact, it is not only not the norm, but would be a procurement model that would undermine an area where they see key competitive advantages, getting better deals on fuel prices.”

Even so, the Decarb Hub has supported development of “Green Corridors” – maritime routes adopting carbon-neutral fuels earlier than mandated – with Mr Forsdyke noting that the early success of some of these corridors has been in carriers agreeing to collective purchasing of fuel.