I believe that LNG is set to accelerate within the container shipping industry this year after a period of steady but slow progress.
This is because I think two of the major challenges holding back widespread use – bunkering infrastructure and high capex costs for LNG technology – have been greatly reduced.
CMA CGM-owned short sea feeder Containerships’ first LNG-fuelled vessel has started operating this year – an event that will help to break down the bunkering infrastructure challenges, as it will be the first box ship to use LNG in European ports. Containerships has set up a bunkering hub in Port of Rotterdam and is using Shell as its bunkering partner. This will boost LNG bunkering infrastructure and will surely encourage other container carriers in Europe to think about this option as a way to meet the 2020 low sulphur directive.
According to the International Association of Ports and Harbors, Rotterdam port estimates that by 2020 it will have granted nine licenses to LNG bunker providers to operate at the port. As the largest European container port and at number 12 globally, this will be significant for box ship operators considering using LNG. And this is just the tip of the iceberg – many ports around the world are developing LNG bunkering facilities.
The launch of CMA CGM’S LNG-fuelled mega vessels in 2020 is going to open the doors for using LNG as fuel – but the bunkering infrastructure will need to be up and ready before this. CMA CGM has signed contracts with Engie and Total to develop LNG bunkering at ports globally, again breaking down the bunkering barrier.
The issue of the up-front costs needed for making a box ship run on LNG has also diminished. An independent study commissioned by SEA\LNG about LNG in the container ship market said recent shipyard prices demonstrate substantially smaller LNG premiums above traditional vessels. Reasons include extensive LNG newbuilding experience and technology improvements leading to shipyard efficiency gains, as well as current market conditions favouring buyers of newbuildings.
This is very important at a time when the container ship industry has been in a down-cycle. Reduced capex costs will also encourage the LNG retrofit market.
The upcoming 2020 low sulphur cap, increased bunkering infrastructure and reduced technology costs create a perfect storm for LNG to really infiltrate the container ship industry.