CONTAINER lines may need to hike freight rates by up to $450/TEU in deep-sea trade to cover additional expenses arising from decarbonizing their maritime operations with low-carbon fuels, according to a study by consultancy UMAS published December 7.
With pressure from regulators and some eco-conscious customers, a growing number of shipping companies have been seeking to switch to alternatives to conventional oil-based fuels to reduce greenhouse gas emissions.
But the low-carbon transition requires extra investments in new propulsion systems and"green" fuels, and the UMAS study finds additional costs in running a zero-emission ship could range between $30/TEU and $70/TEU on a Chinese coastal route and between $90/TEU and$450/TEU on a trans-Pacific route in 2030, reports London's S&P Global.
"The fuel cost gap is now acknowledged as the main blocker for shipping's transition and tackling it requires a frank conversation about the dimension of the challenge," said Camilo Perico, a UMAS consultant who penned the study. "We need 'numbers on the table' and more visibility on how stakeholders can help to cover it."
Based on UMAS' analysis, an additional $20 million-$30 million/year would be required for deploying a ship on scalable zero-emission fuels on the trans-Pacific route between Shanghai and Los Angeles, including $18 million-$27 million/year in fuel costs.
For the coastal trade, an extra $4.5 million-$6.5 million/year are required, including $3.6 million-$5.2 million/year in fuel.
"The analysis shows fuel costs are a major component of the overall cost and therefore the primary driver of the total cost of operation," said Nishatabbas Rehmatulla, principal research fellow at UCL Energy Institute and co-author of the study.
Currently, methanol has emerged as a popular choice among container lines as a future fuel due to readily available technology and existing supply infrastructure, with shipbroker Braemar estimating 166 methanol-capable boxships on order as of December 6.
But UMAS suggested that ammonia could be a cheaper option eventually, even as the fuel is highly toxic and corrosive and the first ships powered by ammonia are only expected to hit the waters in the second half of this decade。