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LNG FUEL PRICES FOR SHIPS DROPS LOWER THAN VLFSO
July 21, 2023

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.

 

Self Photos / Files - 558bbba0793b4c7c82df714bdcc20713.png

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.