The price of Liquid Natural Gas (LNG) for use as maritime fuel has dropped lower than Very Low Sulphur Fuel Oil (VLSFO), according to Sea-Intelligence, making it a viable option for ocean carriers looking to step up on their sustainability goals.
The Danish marine data analytics company analysed the developments in prices for LNG as a maritime fuel with the IMO2020 regulations necessitating the need to reduce sulphur emissions — leaving carriers with the choice between VLSFO, LNG, or scrubbers.
While all were viable options, Sea-Intelligence said, it was entirely unclear which was the "right" choice.
LNG prices lower than VLFSO
"As the market evolved, we first saw a spike in VLSFO prices, suggesting a good case for scrubbers. Then the premium dropped rapidly, and scrubbers seemed like less of a good idea. The premium then escalated once more, making the case for scrubbers," commented Alan Murphy, CEO, Sea-Intelligence.
With the Russian invasion of Ukraine, Murphy noted that LNG prices spiked to extreme levels.
"Now, LNG prices are getting to a point where it is cheaper than VLSFO," the Sea-Intelligence chief added.
The report noted that LNG should be compared to VLSFO prices, as LNG is a fuel which, like VLSFO, adheres to the IMO2020 low-sulphur regulation without the vessel having to install a scrubber.
In the absence of publicly available global LNG prices, the Danish marine data analytics company said it used Rotterdam prices as a proxy — although it raised the question of whether Rotterdam prices are representative of global prices.
Source: Sea-Intelligence
"By comparing IFO380 prices in Rotterdam to the global average for IFO380, we see there is indeed a good match, although the fuel price at Rotterdam is typically lower than the global average," Murphy of Sea-Intelligence said.
He added that in the first half of July 2023, this price discount in Rotterdam was, on average, US$34/ton.
"The extreme LNG price spike in 2021-2022 'drowns out' the more recent developments," Murphy said.
"Even with the -34 USD/ton discount taken into account, it is evident that we are now in a situation where the usage of LNG is financially advantageous compared to VLSFO fuel," the Sea-Intelligence chief further said.
