The European Union’s FuelEU Maritime proposals may help usher in low-carbon fuels over the next three decades, but they could also put the brakes on newbuilding orders for bulk carriers and tankers in the near term.
The proposed regulations, which the European Parliament Committee on the Environment drafted on 28 April, are designed to help phase out traditional maritime fuel oil and fossil fuels by 2050.
To do this, it is looking to introduce measures to restrict the use of LNG-powered ships in EU waters after 2035. And make ship operators use at least 6% e-fuel — alternative carbon-neutral fuels — in their fuel mix by 2030, increasing every five years up to 70% by 2050.
The uncertainty around the regulations may limit bulker and tanker newbuilding orders until owners have a clearer picture of affordable alternative fuels and propulsion technologies, Jefferies analyst Christopher Robertson said.
“While the environmental goals of the FuelEU Maritime proposal are laudable on environmental terms, it is unclear what fuel technologies and necessary fuelling infrastructure, will be available, energy-dense, and economically viable in the future,” he wrote in a note.
He noted that LNG newbuilding orders have risen in the past few years in response to the International Maritime Organization’s upcoming 2030 regulations, and some are being designed to also burn ammonia.
But only 2.3% of the global fleet and 24.7% of ordered ships can run on LNG, and nearly all of the LNG-capable ones can also use low-sulphur marine fuel oil, he said.
This scenario could result in higher spot rates for dry bulk vessels and crude tankers for this year’s second half and next year, Robertson added.
The Baltic Dry Index attained 2,404 points on Friday after gaining 369 points since 12 April.
The Baltic Dirty Tanker Index reached 1,213 points, losing 491 points over the same period.
“As such, we believe the supply picture remains extremely constructive for both the crude tanker and dry bulk segments and predict fleet growth of just 1.3% for crude tankers, and just 1.7% for dry bulk in 2023,” he said.
