Ammonia Emerges as Future Fuel for Shipping
Recent research indicates that ammonia is poised to become the leading fuel choice for the shipping industry by the 2030s. As fleets transition to ammonia, those still relying on methanol or LNG could face operating costs that are 30 to 50 percent higher, raising concerns about their long-term viability. Despite these findings, the shift to ammonia is not happening as quickly as anticipated, prompting experts at UCL’s Energy Institute to explore the factors influencing this transition.
Key Factors Driving Ammonia Adoption
The transition to ammonia as a fuel source is influenced by several critical factors. First, progressive investment from governments plays a significant role. Countries like Norway and Sweden have successfully integrated LNG into their industrial strategies, leading to a strong push for ammonia-ready vessels. Companies such as Höegh Autoliners are at the forefront of this movement, showcasing the impact of supportive policies on industry shifts.
Existing carriers also have a unique advantage in this transition. Vessels already transporting cleaner fuels can more easily adapt to using ammonia as fuel, simplifying operations and reducing the complexities of energy supply chains. This existing infrastructure allows early adopters to capitalize on their current capabilities, making the switch less daunting.
Market dynamics further influence the adoption of ammonia. Consumers are increasingly willing to pay a premium for carbon-neutral products, enabling vessels that transport high-value goods to absorb the costs associated with zero-emissions shipping. Initiatives like the Zero Emissions Maritime Buyers Alliance (ZEMBA) are already demonstrating how buyer influence can accelerate this change, with Hapag Lloyd winning the first tender for low-emission shipping in 2024.
Geographical and Corporate Advantages
Geographical advantages also play a crucial role in the shift towards ammonia. Countries with abundant renewable energy resources, such as Australia and Saudi Arabia, are well-positioned to become major producers of hydrogen and ammonia. This positions them favorably for fleet conversions, particularly for services operating between two ports, where vessel design and refueling can be optimized. For example, BHP has recently contracted two ammonia dual-fueled bulk carriers for the Australia to China iron ore route.
Multinational companies that operate across various markets can also diversify their value chains, spreading the risks associated with decarbonization. Japanese firm Itochu exemplifies this approach, as it invests in ammonia at scale while experimenting with low-emission solutions. Additionally, individual disruptors within the industry are beginning to emerge, challenging the traditionally risk-averse nature of shipping. Leaders like Alex Saverys at CMB are adopting a proactive mindset, signaling a potential shift in the industry’s approach to innovation.
Reports Examine Readiness of Emerging Alternative Fuel Options
As the evidence mounts, it becomes clear that the transition to renewable energy is well underway. Companies that position themselves to lead this change are likely to emerge as long-term winners in the evolving landscape of maritime fuel.
