24/10/04
Global bio-bunker demand to pick up, US left behind
Global bio-bunker demand to pick up, US left behind
New York, 4 October (Argus) — Tightening vessel carbon intensity indicator (CII)
scores and looming 2025 FuelEU marine regulation are expected to raise biodiesel
demand for bunkering, but non-competitive US prices should continue to weigh
down on US bio-bunker demand. Houston B30, a blend of used cooking methyl ester
(Ucome) and very low-sulphur fuel oil (VLSFO), in September averaged at $821/t,
a $45/t premium to B30 sold in Amsterdam-Rotterdam-Antwerp, and a $55/t premium
to B24 sold in the west Mediterranean hub of Gibraltar and Algeciras (see chart)
. Houston B30 was also priced at $115/t and $61/t premium to B24 sold in
Singapore and Guangzhou, China, respectively. The price premium would continue
to incentivize ship owners with global, ocean-going fleets to pick Asia first
for their biodiesel bunker purchases, followed by northwest Europe and western
Mediterranean. US demand for biodiesel for bunkering would continue to stagnate
unless the US passes a legislation allowing Renewable Identification Number
(RIN) credit under the US Renewable Fuel Standard (RFS) program be used by
ocean-going vessels fueling with biodiesel in US ports. The legislation could
level US' price playing field. Two bipartisan bills were put forward in support
of renewable fuel for ocean-going vessels, one in the US Senate this year and
one in the US House of Representatives last year, but they are currently dead in
the water. Conventional marine fuels are priced cheaper than biodiesel and green
varieties of LNG, ammonia, methanol, and hydrogen. But tightening International
Maritime Organization (IMO) and EU regulations are forcing the hand of ship
operators to consider green fuels to avoid hefty penalties and having their
vessels suspended from trading. Ship owners whose vessels are outfitted with
LNG-burning engines, are poised to have the lowest marine fuel expense heading
into 2025, as fossil LNG is currently ship owners' cheapest low-carbon fuel
option. But retrofitting a vessel to burn LNG could range from $5-$35mn,
depending on the size of the vessel. Biodiesel, a plug-and-play fuel that does
not require a vessel retrofit, is the second cheapest low-carbon fuel option
after fossil LNG. IMO's CII regulation came into force in January 2023 and
requires vessels over 5,000 gt to report their carbon intensity, which is then
scored from A to E. The scoring levels are lowered yearly by about 2pc, so even
a vessel with no change in CII could drop from C to D in one year. If a vessel
receives a D score three years in a row or E score in the previous year, the
vessel owner must submit a corrective actions plan. E scoring vessels could be
prohibited from entering some ports' territorial waters, but this penalty is yet
to be imposed on any E vessels. In 2023, the IMO reported that 40pc of the
vessels scored A or B, 27pc scored C, 19pc scored D or E and 14pc were
unresponsive. 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. It imposes a penalty of €2,400/t ($2,629/t) of VLSFO
equivalent energy for vessel fleets exceeding its GHG limits. By Stefka Wechsler
Biodiesel blends* Houston less global ports $/t Send comments and request more
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