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LNG-burning vessels well positioned ahead of 2025

  • Spanish Market: Biofuels, Natural gas, Oil products, Petrochemicals
  • 19/09/24

Vessels outfitted with dual-fuel LNG-burning engines are poised to have the lowest marine fuel expense heading into 2025 when the EU will tighten its marine EU emissions trading system (ETS) regulations and add a new regulation, "FuelEU", from 1 January 2025.

Considering both regulations, at current price levels, fossil LNG (also known as grey LNG) will be priced the cheapest compared with conventional marine fuels and other commonly considered alternative fuels such as biodiesel and methanol.

The EU's FuelEU maritime regulation will require ship operators traveling in, out and within EU territorial waters to gradually reduce their greenhouse gas (GHG) intensity on a lifecycle basis, starting with a 2pc reduction in 2025, 6pc in 2030 and so on until getting to an 80pc drop, compared with 2020 base year levels.

The FuelEU GHG intensity maximum is set at 85.69 grams of CO2-equivalent per MJ (gCO2e/MJ) from 2030 to 2034, dropping to 77.94 gCO2e/MJ in 2035. Vessel pools exceeding the FuelEU's limits will be fined €2,400/t ($2,675/t) ofvery low-sulphur fuel oil (VLFSO) energy equivalent. GHG emissions from grey LNG vary depending on the type of marine engine used to burn the LNG, but ranges from about 76.3-92.3 gCO2e/MJ, according to non-governmental environmental lobby group Transport & Environment. This makes a number of LNG-burning, ocean-going vessels compliant with FuelEU regulation through 2034.

The EU's ETS for marine shipping commenced this year and requires that ship operators pay for 40pc of their GHG generated on voyages within, in and out of the EU. Next year, the EU ETS emissions limit will increase to 70pc. Even with the added 70pc CO2 emissions cost, US Gulf coast grey LNG was assessed at $639/t VLSFOe, compared with the second cheapest VLSFO at $689/t, B30 biodiesel at $922/t and grey methanol at $931/t VLSFOe average from 1-18 September (see chart).

"In 2025, we expect [US natural gas] prices to rise as [US] LNG exports increase while domestic consumption and production remain relatively flat for much of the year," says the US Energy Information Administration. "We forecast the Henry Hub price to average around $2.20/million British thermal units (mmBtu) in 2024 and $3.10/mmBtu in 2025."

Provided that prices of biodiesel and methanol remain relatively flat, the projected EIA US 2025 LNG price gains would not affect LNG's price ranking, keeping it the cheapest alternative marine fuel option for ship owners traveling between the US Gulf coast and Europe.

LNG for bunkering global consumption from vessels 5,000 gross tonnes and over reached 12.9mn t in 2023, according to the International Maritime Organization (IMO), up from 11mn t in 2022 and 12.6mn t in 2021. The maritime port authority of Singapore reported 111,000t of LNG bunker sales and the port authorities of Rotterdam and Antwerp reported 319,000t in 2023 from all size vessels.

Among vessels 5,000 gross tonnes and over, LNG carriers accounted for 89pc of LNG bunker demand globally, followed by container ships at 3.6pc, according to the IMO. The large gap between LNG global and LNG Singapore, Rotterdam, and Antwerp bunker demand, is likely the result of most of the demand taking place at the biggest LNG export locations where LNG carriers call, such as the US Gulf coast, Qatar, Australia, Russia and Malaysia.

USGC bunkers and bunker alternatives $/t VLSFOe

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04/11/24

US railroad-labor contract talks heat up

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico GDP outlook dims in October survey


04/11/24
04/11/24

Mexico GDP outlook dims in October survey

Mexico City, 4 November (Argus) — Private-sector analysts have again lowered their projections for Mexico's gross domestic product (GDP) growth this year, with minimal changes in inflation expectations, the central bank said. For a seventh consecutive month, median GDP growth forecasts for 2024 have dropped in the central bank's monthly survey of private sector analysts. In the latest survey conducted in late October, analysts revised the full-year 2024 growth estimate to 1.4pc, down from 1.46pc the previous month. The 2025 forecast also dipped slightly, to 1.17pc from 1.2pc. The latest revisions are relatively minor compared to the slides recorded in preceding surveys, suggesting negativity in the outlook for Mexico's economy may be moderating. This aligns with the national statistics agency Inegi's preliminary report of 1.5pc annualized GDP growth in the third quarter, surpassing the 1.3pc consensus forecast by Mexican bank Banorte. Inflation projections for the end of 2024 inched down to an annualized 4.44pc from 4.45pc, while 2025 estimate held unchanged at 3.8pc. September saw a second consecutive month of declining inflation, with the CPI falling to 4.58pc in September from 4.99pc in August. The survey maintained the year-end forecast for the central bank's target interest rate at 10pc, down from the current 10.5pc. This implies analysts expect two 25-basis-point cuts to the target rate, most likely at the next meetings on 14 November and 19 December. The 2025 target rate forecast held steady at 8pc, with analysts anticipating continued rate reductions into next year. The outlook for the peso remains subdued, following political shifts in June's elections that reduced opposition to the ruling Morena party. The median year-end exchange rate forecast weakened to Ps19.8 to the US dollar from Ps19.66/$1 in the previous survey. The peso was trading weaker at Ps20.4/$1 on Monday, reflecting temporary uncertainty tied to the US election. Analysts remain wary of Mexico's political environment, especially after Morena and its allies pushed through controversial constitutional reforms in recent months. In the survey, 55pc of analysts cited governance issues as the primary obstacle to growth, with 19pc pointing to political uncertainty, 16pc to security concerns and 13pc to deficiencies in the rule of law. By James Young Mexican central bank monthly survey Column header left October September Headline inflation (%) 2024 4.45 4.44 2025 3.80 3.80 GDP growth (%) 2024 1.40 1.46 2025 1.17 1.20 MXN/USD exchange rate* 2024 19.80 19.66 2025 20.00 19.81 Banxico reference rate (%) 2024 10.00 10.00 2025 8.00 8.00 Survey results are median estimates of private sector analysts surveyed by Banco de Mexico from 17-30 October. *Exchange rates are forecast for the end of respective year. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Construction spending up in September, asphalt weakens


04/11/24
04/11/24

Construction spending up in September, asphalt weakens

Houston, 4 November (Argus) — US construction spending rose slightly in September, with spending on highways and streets higher. Still, asphalt prices declined. Total highway and street spending rose by 0.4pc in September from August to a seasonally adjusted annual rate of about $141.95bn, according to the latest data from the US Census Bureau. This was 1.5pc above September 2023 levels. Despite the increase in highway spending, wholesale asphalt prices in the US midcontinent hit a four-year low for September on excess supply and subdued demand. Midcontinent railed asphalt prices dropped by $45/st for September delivery to $290-$320/st from August. Waterborne prices in the region saw a similar, $45/st decrease to $300-$335/st. The sharp decline stemmed from turnaround activity beginning in late August at BP's 435,000 b/d Whiting, Indiana, refinery which boosted supplies as adverse weather in the southeastern US stifled wholesale demand. The National Weather Service reported above-average precipitation from Louisiana to Virginia in September with Tennessee seeing its fourth wettest September on record. Hurricane activity in early July and late September also impacted demand for the month with construction firms reporting lower third quarter product shipments because of extreme weather conditions. Total spending was up 7.3pc through the first nine months of 2024 compared to the same period in 2023. Private construction spending was supported by residential investment while nonresidential spending fell. Manufacturing spending fell while commercial spending rebounded from August, reversing previous month's trends. Spending on water supply continues to grow. By Aaron May and Cobin Eggers US Construction Spending $mn 24-Sep 24-Aug +/-% 23-Sep +/-% Total Spending 2,148,805.0 2,146,048.0 0.1 2,055,216.0 4.6 Total Private 1,653,624.0 1,653,160.0 0.0 1,592,388.0 3.8 Private Residential 913,632.0 912,186.0 0.2 877,629.0 4.1 Private Manufacturing 234,302.0 234,803.0 -0.2 194,941.0 20.2 Private Commerical 119,191.0 118,927.0 0.2 139,861.0 -14.8 Total Public 495,182.0 492,888.0 0.5 462,829.0 7.0 Public Water/Sewage 76,805.0 76,462.0 0.4 69,634.0 10.3 Public Highway/Road 141,049.0 140,349.0 0.5 138,694.0 1.7 US Census Bureau Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Saudi Luberef’s profit down on year in Jan-Sept


04/11/24
04/11/24

Saudi Luberef’s profit down on year in Jan-Sept

Singapore, 4 November (Argus) — State-controlled Saudi Aramco's base oil subsidiary Luberef posted a significant decrease in profit in January-September as a result of lower margins. Profit in January-September dropped by 38pc from the previous year to 764mn Saudi riyals ($203mn), although revenue rose by 6.5pc on the year to SR7.4bn. This is because base oil and by-products margins decreased. Luberef's base oil sales volumes in the first nine months of this year were up 1pc to 929,000t as compared with 918,000t in the same period last year. Luberef's profit in the third quarter was down by 34pc on the year to SR226mn, against a 2pc on the year drop in revenue to SR2.5bn. Argus -assessed Asian fob Group I and II base oil export prices were largely lower over the third quarter, especially for light grades, while heavy-grade prices were relatively supported because of tighter supply. The Yanbu "Growth II" expansion project is expected to completed at the end of 2025, the company said. This will bring the base oil production capacity at the Yanbu facility to around 1.3mn t/y. Luberef is also studying a project to produce Group III/III+ base oils, which is at the pre-front end engineering design stage. By Chng Li Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Oil services upturn takes a pause for breath


04/11/24
04/11/24

Oil services upturn takes a pause for breath

New York, 4 November (Argus) — The boom in demand for oil field services is showing signs of wavering in the short term as international customers signal greater caution around spending and the outlook for US shale remains challenged. Upstream spending growth in the North American onshore market is expected to be flat in 2025, with low natural gas prices, drilling efficiencies and further consolidation among producers in the shale patch all exerting downward pressure. Given a mixed international outlook, one bright spot will be offshore markets, and deepwater in particular, according to investment management firm Evercore ISI. "The solid growth years of 2023 and 2024 are over as the cycle resets," senior managing director James West says. "We view 2025 as an aberration in a long-term, albeit slower, growth cycle." In the near term, the sector's attention will be focused on spending plans by top producers including state-run Saudi Aramco and Brazil's Petrobras, as well as any signs of a potential recovery in Chinese oil demand given the government's latest stimulus efforts to kick-start growth. The sector has had to contend with more than $200bn of shale mergers and acquisitions over the past year, which has shrunk the pool of available customers, and led to oil field services providers beginning their own round of consolidation. Moreover, with capital discipline remaining the rallying cry, significant productivity gains have enabled producers to do more with less. Its immediate challenges were put into stark contrast this week by oil's renewed plunge, this time on the back of Israel's decision to spare Iran's energy infrastructure from retaliatory strikes. SLB, the biggest oil field services contractor, has attributed recent price volatility to concerns over an oversupplied market owing to higher output from non-Opec producers, as well as questions over when the cartel will return barrels to the market and weak economic growth. That spurred some customers to adopt a "cautionary approach" when it came to activity and spending in the third quarter. Gas to the rescue But SLB remains upbeat over the long-term outlook, given the current emphasis on energy security, a key role for natural gas in the energy transition, and expectations that oil will remain a "large part" of the energy mix for decades to come. Gas investment remains robust in international markets, particularly in Asia, the Middle East and the North Sea. "While short-cycle oil investments have been more challenged, long-cycle deepwater projects globally and most capacity expansion projects in the Middle East remain economically and strategically favourable," SLB chief executive Olivier Le Peuch says. Exploration successes in frontier regions from Namibia to Suriname are also unlocking vast reserves that only serve to bolster confidence in the offshore market. Global offshore investment decisions will approach $100bn this year and in the next 2-3 years, adding up to more than $500bn for 2023-26, according to Le Peuch, representing a "growth engine for the industry going forward". Meanwhile, Baker Hughes expects to capitalise on a growing market for gas infrastructure equipment. The company forecasts natural gas demand will grow by almost 20pc by 2040, with global LNG demand increasing at a faster rate of 75pc. "This is the age of gas," chief executive Lorenzo Simonelli says. The top services firms see limited short-term growth prospects for North America, with the exception of the Gulf of Mexico. Hydraulic fracturing services provider Liberty Energy plans a temporary reduction in its fleet in response to slower customer activity and market pressures. And SLB says any potential pick-up in gas rigs could be offset by a further decline in oil rigs owing to efficiencies. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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