Viewpoint: Japan eyes methanol as marine bridging fuel

Spanish Market: E-fuels, Hydrogen, Petrochemicals
18/12/24

Japanese demand for methanol as an alternative marine fuel is expected to increase, especially after 2027, but it is likely it will mainly be used as a transition fuel before the commercial launch of ammonia- and hydrogen-fuelled vessels.

The Japanese shipping industry is expected to launch more methanol-fuelled vessels from 2027 (see table), to help reduce greenhouse gas (GHG) emissions from the global maritime sector.

Global regulatory body the International Maritime Organization (IMO) in 2023 pledged to achieve net zero emissions in international waters by or around 2050.

To help achieve the IMO's target, a total of 26 methanol-powered vessels are expected to be commissioned worldwide by the end of this year, followed by 54 ships in 2025 and 96 carriers in 2026, according to a report released in November by Japanese classification society ClassNK. This would increase global methanol demand to 4.5mn t/yr by 2026, said the report. As of June, there are 33 methanol-fuelled vessels currently in use.

Methanol-fuelled vessels can refuel at around 130 major ports all over the world, except in Japan, according to Japanese shipowner Mitsui OSK Lines (Mol). The city of Yokohama in the eastern prefecture of Kanagawa, in co-operation with Mitsubishi Gas Chemical (MGC) and Maersk, launched a study on methanol and green methanol bunkering in the port of Yokohama in December 2023. Since then, the group, in collaboration with new partners — Japanese refiner Idemitsu, MGC's shipping subsidiary Kokuka Sangyo, domestic shipping firm Uyeno Transtech and Yokohama Kawasaki international port — has conducted a ship-to-ship bunkering simulation at the port of Yokohama in September.

Expectations of the increase in methanol use, especially cleaner e-methanol, have led Japanese firms to become more involved in upstream projects to secure the fuel. Japanese firms have invested in more than 10 e-methanol production projects both in and outside of Japan (see table), with the number of projects likely to increase, according to the ministry of economy, trade and industry.

Japanese firms are developing new carriers, but at the same time are also trying to modify existing vessels — which currently use fuel oil, LNG, LPG and methanol — to be able to burn renewable fuels such as biofuels, e-methane and e-methanol. It would be easy to increase the number of methanol-fuelled ships, given their relatively low initial or modification costs compared with LNG-fed vessels, according to Mol. Methanol is also a stable liquid at room temperature and atmosphere pressure, making it easy to transport and store compared to other alternative fuels, Mol added.

Fellow shipping company Nippon Yusen Kaisha (NYK line) is also mulling the development of smaller methanol-fuelled handymax ships that are unable to be equipped with large ammonia fuel tanks, to aid with decarbonisation.

Methanol a temporary solution

But Japanese firms see methanol mostly as a "bridging fuel" rather than a zero-emission fuel, as methanol can reduce GHG emissions only by 15pc compared to traditional bunker fuel, although it can curb sulphur oxide and nitrogen oxide emissions by up to 99pc and 80pc, respectively. It would be vital to begin introducing much cleaner marine fuels, such as ammonia and hydrogen, to meet the maritime sector's net-zero goal.

Tokyo is trying to promote the development of ammonia and hydrogen-fuelled ships by providing financial support, while the utilisation of such clean vessels could materialise from around 2030, the ministry of land, infrastructure, transport and tourism (Mlit) said.

Japan's state-owned research institute Nedo plans to provide ¥35bn ($229mn) to support the development of engines, fuel tanks, fuel supply systems and other core technologies for zero-emission ships that use hydrogen and ammonia, as well as LNG and e-methane, under its ¥2.76 trillion green innovation fund. But the grants are much larger than those for the development of methanol-fuelled ships, which are currently available only from Mlit and the environment ministry, with the amount of ¥100mn per vessel over two to three years. The scheme has been open for application every year since 2023. But the ministries' scheme also targets LNG-fuelled ships, with a breakdown of allotment for methanol-powered vessels unclear.

By Reina Maeda and Nanami Oki

Japanese firms' methanol projects
Methanol-fuelled ships
Company	# of vessel	Type	Target commercialisation	Announcement
Mitsubishi Gas Chemical, Mitsui OSK Line	1	Ocean-going methanol carrier	Jul-05	May-23
Toyofuji Shipping, Mitsubishi Heavy Industries	2	Ro-Ro vessel	2027-28 fiscal year	Jun-24
Mitsui OSK Line	1	Coastal methanol carrier	Dec-24	Jul-24
NS United Kaiun, Nihon Shipyard, Jaman Marine United, Imabari Shipbuilding	Multiple	Bulk carrier	After 2027-28 fiscal year	May-24
Orix, Tsuneishi Shipbuilding	2	Bulk carrier		Jul-24
Production
Company	Product	Country	Target commercialisation	Target capacity (t/yr)
Mitsui	E-methanol	US	Jan-24	1630000
Mitsubishi Gas Chemical	Bio-methanol	Japan	Jun-24	Small amount
Mitsubishi Gas Chemical, Kobelco	E-methanol	Japan	NA	NA
Cosmo, Toyo Engineering	E-methanol	Japan	NA	NA
Sumitomo Chemical	E-methanol	Japan	2030s	NA
Mitsui, Asahi Kasei	Bio-methanol	US	Jun-23	NA
Toyo Engineering	E-methanol	India	2030	NA
Investment
Company	Product	Country	Target commercialisation	Target capacity (t/yr)
Mitsui	E-methanol	Denmark	NA	42,000
Idemitsu	E-methanol	Brazil, US, Chile, Uruguay, Australia	2,030	4,000,000
JOGMEC	E-methanol	Brazil, US, Chile, Uruguay, Australia	2,030	4,000,000
Mitsu OSK Line	E-methanol	Brazil, US, Chile, Uruguay, Australia	2,030	4,000,000
Table source: Firm's company releases

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18/12/24

Viewpoint: EU PVC margins to hold below average in 2025

London, 18 December (Argus) — European polyvinyl chloride (PVC) margins are likely to remain subdued in 2025, with a repeat of the sluggish demand and rising ethylene costs seen in 2024. Weakening European PVC consumption throughout 2024 was mainly underpinned by lower construction activity, a key demand driver. Construction purchasing managers index (PMI) data, compiled by S&P Global and Hamburg Commercial Bank (HCOB), show the eurozone construction PMI for 2024 peaked in October at 43.0, still way below the 50 mark that separates contraction and expansion. PVC market participants are cautiously optimistic that recent declines in interest rates from the European Central Bank (ECB) may help stimulate demand for home-builds in 2025, and improved PVC demand will follow. The ECB reduced rates three times in 2024, to 3.25pc. Rates may continue to ease in the short term, but as witnessed in 2024 this would take time to filter through to European PVC demand. Because of this, buyers are contemplating either maintaining or reducing contractual PVC volume commitments for 2025, noting struggles with passing raw material costs to customers. Anti-dumping duties (ADDs) on s-PVC imports from the US and Egypt helped to reduce excess supply in 2024, and while this is likely to continue into 2025 there is limited interest from buyers to source additional supply because of lower demand. Asian s-PVC imports remained minimal, with volatility in freight costs and longer lead times likely to suppress buying interest into 2025. Re-balancing act Domestic PVC producers focused on reducing inventories and operating rates for much of 2024 to keep the market balanced, with average operating rates between 60-70pc for s-PVC production and at the higher end of the range for specialty grades. But re-balancing proved to be a slow process in light of weakening demand, forcing European producers to keep operating rates and margins low for much of the year. Argus calculated s-PVC net production margins, based on feedstock ethylene costs in northwest Europe, averaged around €287.04/t between January-November 2024, lower by €109.04/t than during the same period in 2023 and around €73.40/t lower than the Argus 2015-23 average. Easing electricity costs in 2024 helped to suppress further PVC margin loss, but demand weakness throughout the year remained in favour of buyers as contract prices settled predominantly below the implied ethylene cost. With European ethylene prices likely to increase and PVC demand expectations suppressed throughout 2025, there could be another year of below-average margins for PVC producers. Argus assessed the December suspension PVC (s-PVC) preliminary contract marker for northwest Europe at €1,120/t on 20 December, reflective of a preliminary contract delta for December at minus €5/t. This is comparable to an ethylene monthly contract price (MCP) movement of minus €7.50/t for December. This raises the possibility of further supply consolidation in Europe to re-balance the market in the medium term, with smaller producers announcing potential closure of PVC production units in central and eastern Europe in 2025. Others plan to mothball some specialty PVC production lines, while others are seeking import licenses to supply PVC into emerging markets such as India. This is difficult to achieve because of cost-competitiveness. A rise in regional construction activity, and therefore PVC demand, will remain the quickest way to re-balance the market, helping to raise operating rates and margins back to above-average levels as buyers commit to more contractual volumes. By George Barsted and Michael Vitiello Integrated s-PVC NWE net margins €/t Eurozone construction PMI Index Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Danish fund buys 90pc of Canadian H2 project

17/12/24

Danish fund buys 90pc of Canadian H2 project

Houston, 17 December (Argus) — Danish renewable fund Copenhagen Infrastructure Partners (CIP) has acquired a majority stake in German developer ABO Energy's hydrogen project in Newfoundland, Canada. CIP bought a 90pc stake in ABO's Toqlukuti'k project, which is expected to use wind to produce hydrogen and ammonia, the companies said on Tuesday. ABO will hold the remaining 10pc. Financial terms of the transaction were not disclosed. The multiphased project would produce hydrogen to decarbonize production at the nearby Braya Renewable Fuels refinery in Come-by-Chance as well as ammonia for export, ABO has said. Construction was to begin in 2026, the company said in March. However, Braya announced 9 December that it is weighing whether to idle its 18,000 b/d biorefinery before the end of year because of poor margins and uncertainty about US biofuels policy. ABO and CIP did not comment on Toqlukuti'k project plans, other than noting the site has the capacity to develop up to 5GW of onshore wind. Capitalizing on ample wind and its proximity to northern Europe, Newfoundland has been at the center of Canadian ambitions to build hydrogen capacity and export derivative products. In 2022, Canada signed an agreement to supply Germany with clean hydrogen and foresaw exports by 2025. However, exports are unlikely by next year as project timelines have slipped and northern European demand has failed to takeoff. Last month, another would-be Newfoundland hydrogen developer said it was exploring options to co-locate its project with a data center or steel manufacturing because export markets were taking longer than expected to develop. By Jasmina Kelemen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

H2, e-LNG plant stuck awaiting German GHG credit system

17/12/24

H2, e-LNG plant stuck awaiting German GHG credit system

London, 17 December (Argus) — A Danish renewable hydrogen and e-fuels project is currently sat idle as it is waiting for Germany to ready the platform for companies to register compliant products and generate tradeable GHG quota credits, the developers told Argus . Danish firms Gron Brint and GronGas have finished building a co-located 2MW electrolyser and e-LNG production plant, respectively, to supply LNG trucks in Germany, but their project cannot profitably start production without access to the credits. The project was among the first to face the issue as it was the first to get certified , but more producers could encounter the same roadblock, the longer the wait for a registration platform goes on. Germany this month took a key step to unlock access to credits when Berlin endorsed certification schemes for renewable fuels of non-biological origins (RFNBOs) — essentially renewable hydrogen and derivatives. But the country's environment agency UBA only plans to start preparing its electronic database of certification for hydrogen next year, it recently told Argus . Without that database, firms cannot generate evidence that their product is compliant with rules nor access credits. Gron Brint and GronGas are waiting for UBA to clarify if firms could retrospectively add evidence to the platform, the companies' chief financial officer Rasmus Bang said. The Danish producers and their customer would otherwise be ready to trade in early 2025, according to Bang. "We're doing all we can to make people know there are actually plants ready to produce," GronGas chief executive Allan Olesen said. "It's worrying that they haven't even started making a database yet, so we don't even know when they'll be ready" Olesen said. "My worry is that it could be middle or even late 2025," he added. "It doesn't seem like this is a big task for UBA, it's not top of their priority list," Olesen said. Gron Brint targets customers in Germany rather than Denmark, as the former has more LNG trucks and a much more lucrative GHG credit system, Bang said. Denmark set lesser CO2 reduction mandates than Germany, so willingness to pay for such fuels is lower, he said. Its location in northern Jutland lacks gas grid access or compression facilities so blending into pipelines or transport in the form of compressed natural gas with later regasification is not viable, he added. The European Commission adopted its definition for renewable hydrogen 18 months ago, but practical systems to evidence and track compliant product still seem to be lacking across the bloc. Companies are frustrated with slow progress, but Germany and Denmark are still one step ahead of their peers in having recognised certification schemes. By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

CBAM to drive low-carbon NH3 market: Woodside Q&A

16/12/24

CBAM to drive low-carbon NH3 market: Woodside Q&A

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E-PVC buyers build stocks ahead of US tariffs

13/12/24

E-PVC buyers build stocks ahead of US tariffs

Houston, 13 December (Argus) — Emulsion-grade polyvinyl chloride (E-PVC) producers and buyers are racing to build inventories ahead of potential US tariffs on imported goods, according to market participants at the Vinyl Week conference this week in Louisville, Kentucky. President-elect Donald Trump has said he would impose 25pc tariffs on all goods imported from Canada and Mexico after he takes office next month, and that he would raise tariffs on Chinese imports by 10pc. Tariffs on Mexican imports are of particular concern to buyers who rely on the country for some imported E-PVC, also known as specialty or paste PVC. Some US buyers at the conference sponsored by the Plastics Industry Association said a more expansive tariff policy would not only raise delivered prices for E-PVC, it also would also be inflationary for everyday goods. Higher prices could reduce consumer spending power and cut demand for E-PVC in flooring or automotive manufacturing. Other buyers of E-PVC said a more focused scope for tariffs that centered on supporting industry in the US could be beneficial. One flooring producer said tariffs could allow it to recapture market share for products like luxury vinyl tile that have been increasingly dominated by imports from countries like China. Flooring is one of the two largest end use consumers for E-PVC. Suppliers are taking precautions, even if the tariff policy proves to be limited. European producers with extensive warehouse networks in the US have been exporting even greater volumes to North America ahead of potential tariffs that Trump threatened during his campaign, as well before a potential resumption of dockworker strikes in mid-January. US distributors are building inventories of Mexican imports in order to beat the threatened tariffs. US dependence on E-PVC imports deepened after Orbia closed its 60,000 t/yr Pedricktown, New Jersey plant in the fourth quarter with plans to supply US cusomers from its plant in Marl, Germany. The closure leaves the US E-PVC manufacturing capacity at around 156,000 t/yr. While the E-PVC market is more niche compared to the suspension-grade market used in pipe production, the US is structurally short on supply for specialty resins. Many E-PVC buyers with operations on both sides of the Atlantic expect US demand growth to be stronger than in Europe. Some European producers have been raising operating rates above 70pc because exporting excess volume to the US was a viable option. Tariffs could challenge that strategy as higher import prices for US buyers would pressure export prices, and European producers are not inclined to cut prices, market participants said. If Trump does not implement his promised tariffs, E-PVC buyers and producers alike generally agreed that US market demand would be stable to up slightly in 2025. By Aaron May Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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