The adoption of green marine fuels in Asia's shipping sector is expected to slow in 2026, following a turbulent year marked by the International Maritime Organization's (IMO) deferment of its proposed Net Zero Framework (NZF) in October.
The sector is revisiting investment plans affected by geopolitics and global policy making, and faces further challenges in the year ahead.
Biofuel blends slow down
"We don't see a sizeable increase in bio-bunker [demand next year]," a key Singapore-based trader said. Year-on-year demand for biofuel blends at the port of Singapore dropped by 46.6pc to 62,200t in November, preliminary data from the Maritime and Port Authority of Singapore (MPA) show. Demand for bio-bunkers is likely to be slow but steady in 2026 compared with this year. The implementation of RED III affected this market throughout the last quarter of 2025, the trader said.
Trading of used cooking oil methyl ester (Ucome) based blends with very-low-sulphur fuel oil (VLSFO) and high-sulphur fuel oil (HSFO) has been slow because buyers anticipate tighter sustainability rules and the exclusion of key waste-based biofuels under RED III. This is likely to raise compliance costs and redirect European demand toward advanced grades.
But total bio-blend consumption in Singapore reached 1.2mn t during January-November this year, 42.8pc higher than the full-year total for 2024. Biofuels were the first alternative fuel adopted by the shipping sector, and their adoption has grown quickly since 2022. But a slowdown in demand could occur in 2026 because of uncertainty following the deferment of key frameworks under the IMO's NZF.
The IMO's proposed Life-Cycle Assessment (LCA) Guidelines are one of these frameworks. The LCA guidelines aimed to help shipowners calculate their compliance on a well-to-tank (WtT) and tank-to-wake (TtW) basis.
LNG poised for further growth
LNG as a bunker fuel maintained its robust consumption growth in Singapore this year. Total LNG consumption was 631,000t in January-November, up by 36pc from the same period a year earlier.
LNG bunkering is growing at key ports in China, and infrastructure has developed throughout this year.
But LNG barges remain a bottleneck, with only a handful available across the Asia-Pacific region. Three barges are operational in Singapore, with a few more on the order books. The estimated $80mn cost to build an LNG barge is a key deterrent.
Growth in LNG bunkering is likely to continue as Asian shipowners have invested in building LNG-fuelled vessels. The total number of LNG dual-fuelled newbuilds on order books was 966, the highest for any alternative fuel, the latest data from Norwegian classification agency DNV show.
Conventional bunkers anchor demand
Alternative fuels are the focus of the latest developments in marine fuels, but conventional fossil fuels remain an option because of their lower price. The shipping sector's firm demand for conventional fuels was reflected in sales in Singapore. Year-to-date sales accounted for 96pc share of the total bunker consumption at around 49.5mn t from January to November, MPA data show.
HSFO demand is likely to stay supported in the coming year, especially if ample supplies in Asia continue to weigh on prices in the near term. Most shipowners and charterers still prioritise crew safety, opting for the longer shipping route around the Cape of Good Hope instead of travelling through the Red Sea, where there are possibilities of maritime attacks by Yemen's Houthi group. Refuelling with HSFO instead of VLSFO translates into significant cost savings and payback on scrubber investments for vessel owners, while allowing ships to comply with 0.5pc sulphur emission caps. The scrubber spread, the price difference between VLSFO and HSFO, averaged $74.38/t this year as of 26 December.
Moving forward, demand for conventional fuel oil in Singapore will likely be sustained, as over 97pc of ships in operation do not have alternative fuel technology, DNV data show. But further growth in conventional fuel buying interest may be capped, given the shipping sector's transition to net-zero carbon fuels.
The number of ships capable of operating on alternative fuels is set to nearly double between 2024 and 2028 based on the current order book, DNV said in its Maritime Forecast to 2050. "Trading patterns, cargo owners' willingness to pay a premium for green transport, asset value, and technical challenges affect shipowners' willingness to invest in alternative fuel-capable ships," DNV said.
