What's Happening?
A report by the Boston Consulting Group (BCG) highlights that the shipping industry is not the primary driver of demand for low-carbon fuels, such as biofuels, ammonia, and methanol. Instead, sectors like road transport, power, and aviation are shaping
the supply and demand dynamics for these fuels. The report indicates that shipping companies are 'price takers' in these markets, relying on decisions made by other industries to guide their decarbonization efforts. Despite new measures from the International Maritime Organization, structural changes in the shipping sector are expected to be incremental before 2030. The report also notes that Japan and South Korea are promoting ammonia co-firing in coal power plants, positioning the Asian power sector as a key player in the low-carbon ammonia market.
Why It's Important?
The findings underscore the challenges the shipping industry faces in transitioning to greener fuels. As other sectors drive demand and set prices, shipping companies may struggle to secure affordable and sufficient supplies of low-carbon fuels. This dependency could hinder the industry's ability to meet decarbonization targets and contribute to global efforts to reduce greenhouse gas emissions. The report suggests that shipping companies need to adopt strategies such as collaborative procurement and co-investment with energy producers to manage risks and ensure supply. The industry's lag in adopting green fuels could also impact its competitiveness and reputation as environmental regulations tighten globally.
What's Next?
To address these challenges, shipping companies may need to advocate for supportive policies and explore multifuel flexibility to adapt to changing market conditions. The development of infrastructure, storage, and safety protocols for ammonia-fueled vessels could make them viable by 2030-2035. Additionally, breakthroughs in ammonia cracking technology and expanded sustainable aviation fuel requirements could reshape the market dynamics. The shipping industry will need to closely monitor these developments and adjust its strategies accordingly to remain competitive and compliant with evolving environmental standards.
