Shipping Industry Sees Record Investment in Alternative Fuels for 2024

January 3, 2025
Shipping Industry Sees Record Investment in Alternative Fuels for 2024

The shipping industry is experiencing a remarkable surge in investment in alternative fuel tonnage in 2024, marking a significant turn toward sustainable solutions amidst industrial growth. This trend emerges as newbuild ordering activity has seen an unprecedented rise, reaching levels not observed since before the financial crash of 2008. According to Clarksons Research, an impressive 50% of all tonnage ordered in 2024 is equipped with capabilities for alternative fuels, with another 20% featuring “ready” notations for future adaptations.

Record Levels of Newbuild Orders

Steve Gordon, the global head of Clarksons Research, provided a detailed overview of the new orders in 2024, which saw 820 vessels ordered, amounting to a gross tonnage (GT) of 62.2 million. When excluding liquefied natural gas (LNG) carriers, 727 vessels with a combined GT of 52.1 million were ordered. This represents a historic level of investment in ships capable of utilizing alternative fuels, emphasizing the industry’s commitment to cleaner, more sustainable options.

Significantly, LNG fuel technology has witnessed a substantial resurgence. In 2024, LNG accounted for 70% of the alternative fuel tonnage, excluding LNG carriers, a significant increase from 43% in 2023. Conversely, methanol’s share in the 2024 order book declined to 14%, down from 30% the previous year. This shift can partly be attributed to Maersk’s strategic decision to enhance its methanol-focused order book by incorporating LNG capability, recognizing that the availability of green methanol in the necessary volumes to meet bunker demand may not materialize as quickly as hoped.

Diverse Range of Alternative Fuels

The order book for 2024 includes a varied array of alternative fuels, reflecting the industry’s exploratory approach to sustainable energy sources. A total of 390 orders for LNG were placed (297 excluding LNG carriers), alongside 118 for methanol, 25 for ammonia, 72 for liquefied petroleum gas (LPG), and 12 for hydrogen. In addition, 452 orders were notated as “ready,” accounting for 21% of the order book. Here, methanol emerged as the most popular alternative fuel with 320 orders, followed by ammonia at 130 orders.

Alternative fuel adoption was notably highest among containerships exceeding 12,000 twenty-foot equivalent units (TEU) and car carriers. Among large box ships, LNG accounted for 71%, while methanol stood at 17%. For car carriers, the division was 78% for LNG and 21% for methanol. In contrast, sectors such as ultramaxes, handysizes, and medium-range (MR) tankers were slower to adopt alternative fuels, with only 4%, 4%, and 1% of ordered tonnage incorporating these sustainable options, respectively.

Future Projections and Infrastructure Challenges

Looking ahead, Clarksons Research forecasts significant growth in the adoption of alternative fuels. By 2030, it is projected that over a fifth of fleet capacity will be capable of using alternative fuels, a considerable increase from just 2% in 2017 and 8% in 2024. This projection underscores the shipping industry’s ongoing efforts towards decarbonization, although it is not without significant challenges. One crucial obstacle is the availability of necessary infrastructure.

The Green Technology Tracker by Clarksons highlights that 276 ports are currently equipped for LNG bunkering, 275 ports have shore power connections, but a mere 35 ports have existing or planned methanol bunkering facilities. This limited infrastructural readiness poses a substantial challenge for the broader adoption of alternative fuels. Additionally, an aging fleet, averaging 13.1 years on a gross tonnage weighted basis as of 2024 (up from a low of 9.7 years in 2013), exacerbates the situation. An estimated one-third of fleet capacity was rated D or E under the Carbon Intensity Indicator (CII) last year, putting additional pressure on the industry to improve energy efficiency.

Retrofitting and Technological Advancements

In 2024, the shipping industry is witnessing a significant influx of investments in vessels powered by alternative fuels, marking a notable shift toward sustainable practices amidst robust sector growth. This movement comes alongside a dramatic increase in newbuild orders, reaching levels not seen since before the 2008 financial crisis. Clarksons Research reports that 50% of all new orders for 2024 include capabilities for alternative fuels. Moreover, another 20% of these newbuilds come with “ready” notations, allowing them to be adapted for alternative fuels in the future. This trend represents a substantial commitment to greener shipping solutions and reflects the industry’s growing awareness and responsiveness to environmental concerns. As global pressure mounts for sustainable operations, the shipping sector’s surge in eco-friendly vessel investments shows a promising alignment with broader efforts to combat climate change and reduce carbon footprints on a large industrial scale. This aligns with international regulations and consumer demand for more responsible shipping practices.

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