CMA CGM in $3bn methanol, LNG ship deal

Spanish Market: Natural gas, Petrochemicals
11/04/23

French shipping firm CMA CGM has signed a $3bn agreement with Chinese shipbuilder China State Shipbuilding Corporation (CSSC) to build 16 methanol and LNG-fueled container ships.

The deal calls for 12 methanol ships at 15,000 20ft equivalent units (TEU) and four LNG dual-fuel vessels at 23,000 TEUs.

The LNG ships are likely a continuation of a series of vessels ordered by CMA CGM beginning in 2020, but the methanol vessels are part of a new agreement with CSSC.

CMA CGM first took a delivery of a LNG ship, Jacques Saade, in September 2020. In 2021 it ordered 12 LNG-fueled ships.

Earlier this year, one of CMA CGM's LNG vessels, Concorde, refueled in Shenzhen, China. Chinese state-controlled firm CNOOC supplied the comtainership with 6,000m³ of LNG in January.

The French shipping company also signed an agreement for green methanol supply with China-based shipping company Cosco Shipping and Shanghai International Port, which will begin at an undisclosed time.

CMA CGM has invested heavily in LNG and methanol as part of its alternative marine fuels strategy. The company has on order 77 LNG ships and six methanol ships, according to its latest sustainability report released earlier this year. The company said it cut its CO2 emissions by 50pc per TEU-km compared with 2008 levels.

According to its report, CMA CGM's marine fuel consumption went up slightly went up to 8.1mn t in 2022, compared with 8mn t in 2021. Its share of alternative marine fuels such as LNG and biofuels has increased significantly.

Its ships consumed 409,000t of very low-sulphur fuel oil (VLSFO)-equivalent LNG last year, compared with 205,000t of VLSFO-equivalent LNG in 2021. For biofuels, its consumed 99,000t in 2022 and 22,000t the year before, the company's report shows.

By Luis Gronda

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26/12/24

Viewpoint: US gas market poised for more volatility

New York, 26 December (Argus) — US natural gas markets may be subjected to more dramatic price swings in 2025 as growing LNG exports and increasingly price-sensitive producers place greater pressure on the US' stagnant gas storage capacity. Those price swings could pose challenges for consumers without ample access to gas supplies, as well as producers interested in keeping some output unhedged to capture potentially higher prices without taking on excessive financial risk. But volatility may also present opportunities for traders looking to exploit unstable price spreads, and for producers that can adapt their operations to fit a more unpredictable pricing environment. Calm before the storm High storage levels and low spot prices this year — averaging $2.11/mmBtu through November this year at the US benchmark Henry Hub — triggered by an unusually warm 2023-24 winter, may have obscured some of the structural factors pushing the US gas market into a more volatile future. But those structural factors remain and loom increasingly large for prices. The US has moved from a roughly 60 Bcf/d (1.7bn m³/d) market eight years ago to a more than 100 Bcf/d market today, "and we haven't grown our storage capacity at all", Rich Brockmeyer, head of North American gas and power at commodity trading house Gunvor, said earlier this year. As supply and demand for US gas grow, the country's roughly 4.7-Tcf storage capacity becomes ever less effective in stemming demand shocks, such as extreme winter weather events, which can more rapidly draw down inventories than in years past. Additionally, a growing share of US gas is being consumed by LNG export terminals being built and expanded on the US Gulf coast. When those facilities encounter unexpected problems and cease operations — as has happened numerous times at the 2 Bcf/d Freeport LNG terminal in Texas in recent years — volumes that were previously being liquefied and sent overseas were instead backed up into the domestic market, crushing prices. More LNG exports may mean more opportunities for such supply shocks. US LNG exports are expected to increase by 15pc to almost 14 Bcf/d in 2025 as operations begin at Venture Global's planned 27.2mn t/yr Plaquemines facility in Louisiana and Cheniere's 11.5mn t/yr Corpus Christi, Texas, stage 3 expansion, US Energy Information Administration data show. Spot price volatility will be most acutely felt in regions like New England that lack underground gas storage. "In areas like the Gulf coast, where you have a lot of storage, it won't be a problem," Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus in an interview. Producers' trade-off Volatile gas markets are a mixed bag for producers, many of whom profit from volatility while also struggling to plan and budget based on uncertain revenues for unhedged volumes. Though insufficient gas storage deprives the market of stability, "from the standpoint of a marketing and trading guy that's trying to manage my gas supply to customers and my trading book, I love volatility",said Dennis Price, vice president of marketing and trading at Expand Energy, the largest US gas producer by volume. BP chief financial officer Sinead Gorman in November 2023 specifically named Freeport LNG's eight-month-long shutdown in 2022-23 from a fire as a driver of volatility in the global gas market. The supermajor was able to exploit the "incredibly fragile" gas market, she said, which was a key factor driving the success of its integrated gas business. "Those opportunities are what we typically seek and enjoy," Gorman said. Increasingly, producers have also been adapting to a more volatile market by switching production on and off in response to prices, but often without revealing the price at which a supply response will occur. Expand Energy, for instance, told investors in October that it was amassing drilled but uncompleted wells and wells that had yet to be brought on line, which it could activate relatively quickly when prices rise. It declined to name the price at which that would occur. Market participants, attempting to price in this phenomenon by anticipating producers' next moves may respond more dramatically to supply signals than in the past, when production was steadier. Producers' increased responsiveness to prices could help to balance the market somewhat, though more aggressive intervention into operations could take a toll on well performance and pipelines, FactSet senior energy analyst Connor McLean said. Producers are "treating the reservoir itself like a storage facility", Price said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US PGP prices set to rise in 2025

26/12/24

Viewpoint: US PGP prices set to rise in 2025

Houston, 26 December (Argus) — US spot polymer-grade propylene (PGP) prices are likely to increase into 2025, driven largely by several planned limitations on supply. By mid-December, the US PGP market had the sharpest contango structure between the prompt month and the forward month since Argus began tracking data over 10 years ago. A contango is when the next month's price is higher than the current month's price. On 12 December, December-delivery PGP at the Enterprise Products Partners (EPC) system at Mont Belvieu, Texas, traded at 35.75¢/lb, while January-delivery PGP traded twice at 38.75¢/lb. Argus ' PGP forward curve shows prices rising to over 40¢/lb by the second quarter of next year. Many factors are behind this record 3¢/lb premium for January PGP and the continued increase into mid-year. The first is that spot prices have dipped to their lowest levels since August 2023 on a rare period of no major supply disruption at propane dehydrogenation (PDH) units, which produce on-purpose propylene. Most propylene production in the US comes as a byproduct from refineries or as a co-product from steam crackers. All four US Gulf coast PDH units have been operating without major incident or extended shutdown since the late summer. Since mid-August, only Enterprise's PDH-1 was shut, for two weeks in mid-October, but this was not enough to stop the downtrend in PGP's spot price. US spot PGP prices declined by 40pc from a 12 August near-term peak of 58¢/lb to a low of 35¢/lb on 9 December. A second major factor behind the market's sharp contango is that PGP supply is set to tighten in 2025. Propylene supply will have a structural reduction when LyondellBasell's 264,000 b/d refinery in Houston begins shutting down units in January and completed closes by the end of the first quarter. The company sought to exit the refining business but could not find a buyer for the refinery, which produces 136,000 metric tonnes (t)/yr of propylene. There are no planned additions to US propylene capacity in 2025, and several US crackers that produce propylene as a co-product are set for turnarounds in the first quarter. Meanwhile, propylene demand is set to structurally rise in the second half of 2025, when Formosa's new 250,000 t/yr polypropylene plant in Point Comfort, Texas, is scheduled to come online. A third major factor indicating that US spot PGP prices in December are the lowest they will be for at least several months is seasonality. One market participant said that spot activity to end 2024 is largely characterized by sellers destocking inventory ahead of the state of Texas' ad valorem taxes on inventories. This tends to cause seasonally lower prices in December and then a rise in prices in January as the market restocks inventory. This trend has persisted for the last four straight years. These three major factors — uninterrupted supply to end 2024, supply tightening in 2025, and seasonal buying patterns — all stand behind the sharpest contango into the next year for propylene in 10 years of record keeping. The forward curve for PGP indicates a rise of 5¢/lb between now and the middle of next year. The forward curve, though, does not account for any unplanned shutdowns of PDH units, which happen frequently as PDH units are operationally less reliable than propylene-producing crackers and refineries. In July, the US had three of its four PDH units shut down, taking 2.9mn t/yr of on-purpose propylene capacity offline. Such incidents could spike prices for PGP above the uptrend expected into next year. By Michael Camarda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: California dairy fight spills into 2025

24/12/24

Viewpoint: California dairy fight spills into 2025

Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US BD demand awaits 1Q rebound as risks loom

24/12/24

Viewpoint: US BD demand awaits 1Q rebound as risks loom

Houston, 24 December (Argus) — US demand for butadiene (BD) is expected to increase in January, but buyer sentiment for the remainder of the first quarter remains uncertain. Inventory restocking in January is expected to draw down excess supply and provide near-term price support, according to market participants. Derivative manufacturers aim to rebuild inventories following earlier-than-normal destocking initiatives this year. Many buyers employ standard inventory control management strategies to avoid paying higher end-of-year inventory taxes, particularly in Texas. Others cut costs to improve year-end financial statements. Domestic demand in February and March is less clear, as market participants question whether the market will rebound from persistently low demand at the end of 2024. US BD prices on a contract basis fell by 12pc during the fourth quarter , owing to weak demand and oversupply. Demand was depressed by BD consumer turnarounds in October, seasonal slowdowns between November-December and trade pressures tied to derivative imports. US tire shipments this year are expected to rise by 2.1pc to 338.9mn units, surpassing the record set in 2021, according to the US Tire Manufacturers Association. However, market participants along with US trade data reference a jump in tire imports from Asia-Pacific. Both Bridgestone and Goodyear have said low-cost tire imports and structural changes in segment profitability across the Americas are eroding their market share, fueling capacity rationalization, asset sell-offs and plant closures in the region. Acrylonitrile butadiene styrene (ABS) is another segment at risk of stronger competition from low-cost, Asia-origin imports. Ineos Styrolution plans to permanently shut down its ABS plant in Addyston, Ohio, in 2025 because the facility cannot compete with imported material. "Over the past few years, we have seen the ABS market become increasingly competitive, particularly with growing competition from overseas imports," Ineos Styrolution chief executive Steve Harrington said in late October. Protectionist trade policies are likely to be a feature of president-elect Donald Trump's second administration, potentially altering business investment decisions and durable goods trade flows. Even if demand does not improve, planned maintenance in the first half of 2025 is expected to tighten BD supplies. A heavy turnaround cycle for steam crackers will concentrate in the first and second quarters, constraining availability of feedstock crude C4. One integrated US Gulf coast producer plans to enforce BD allocations while its assets are offline for planned maintenance. A separate, non-integrated producer has not announced BD sales controls, based on feedback from its customers. This same BD supplier was short on feedstock supplies for parts of this year, with the crude C4 merchant market illiquid in North America. A third producer has scheduled a cracker turnaround starting in January, but no indications emerged that would limit term volumes from its BD unit. Reduced BD supply during cracker maintenance is likely to pull volumes away from the export market until the second half of 2025. Export spot cargoes in the fourth quarter more than doubled from the third quarter, serving as a critical outlet to clear the domestic market of surplus BD supplies, even as lower export prices pressured US margins. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

23/12/24

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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