How ammonia will fuel the ships of Asia

How ammonia will fuel the ships of Asia

The shipping industry knows it has a problem with emissions and it's been looking at ways to reduce them for years. But fossil fuels still accounted for more than 99% of its total energy consumption in 2021, the latest International Energy Agency (IEA) data shows, contributing to the industry being responsible for around 2% of global energy-related CO₂ emissions.

To get on track for net zero emissions, alternative low- or zero-carbon bunker fuels — any fuel used to power a ship — must be introduced into the mix, according to the IEA.

While there are several viable alternatives, ammonia has some unique benefits that mean it could emerge as a vital compound for fueling the cleaner ships of tomorrow, particularly in Asia.

Progress in developing greener fuels is already underway in the shipping sector. The Global Maritime Forum's report Mapping of Zero Emission Pilots and Demonstration Projects shows a near-doubling in project numbers to 203 between 2021 and 2022, with ammonia fuels taking an increasingly large share.

Ammonia's supply chain is already in place thanks to its global usage in fertilizer production

Ammonia's risks and rewards

Ammonia has many advantages for shipping. It can be used as a carrier for hydrogen, it has a higher energy density than hydrogen, and it is easier to store and transport. At the same time, its importance in global fertilizer production means a supply chain and infrastructure to transport it are already in place.

Ammonia can also be used for fuel in internal combustion engines and does not produce carbon dioxide, sulfur or particulate emissions. In the case of green ammonia, there are also potentially unlimited resources to power its production in the form of renewable energy.

But ammonia is also corrosive and toxic, meaning it requires careful management. Exhaust gas from ammonia-fueled engines contains nitrogen oxides and nitrous oxide, so technology is required to remove these harmful substances, such as Mitsubishi Power's new combustor and selected catalytic reduction system.

Availability and scalability

Because of its relationship with fertilizer production, ammonia is produced in many countries, with China the leading producer.

Annual production capacity reached almost 240 million tonnes in 2022, with 4% average annual growth predicted between then and 2027, according to a GlobalData report.

But almost all existing ammonia production is “conventional”, meaning it derives from carbon-emitting natural gas. In order to meet the increasing demand as a clean fuel, the industry needs to shift to green ammonia, derived from renewable energy sources, or to blue ammonia, derived from natural gas and combined with carbon capture, utilization and storage (CCUS).

Blue ammonia and hybrid green ammonia — which is ammonia produced in plants that use both fossil fuels and renewable electricity — are both necessary components of the journey to net zero, providing a cost-effective transition to green ammonia production, according to a Haldor Topsøe report.

But transitioning will take time. Global merchant trading fleet numbers are in the high tens of thousands, and replacing high-emitting fossil fuels with cleaner alternatives won't happen overnight.

Conceptual shipping fuel projects are increasingly focusing on ammonia

Asia as a future ammonia hub

The global bunker fuel market is predicted to be worth $170 billion by 2030, with an annual growth rate of 5.2%, a Market Research Future report notes.

At its heart sits Singapore, the world's largest bunkering port by sales and a major hub linking east and west trade routes. Any significant adoption of ammonia or other new bunkering fuels there will impact global shipping.

In Singapore and across Asia, several initiatives are underway that support ammonia as a bunker fuel of the future.

Singapore plans to embark on hydrogen pathfinder projects as part of its National Hydrogen Strategy, beginning with the use of ammonia. In line with this, the Energy Market Authority and the Maritime and Port Authority of Singapore have called for proposals on a non-binding Expression of Interest to build, own and operate an end-to-end low- or zero-carbon ammonia power generation and bunkering solution on Singapore's Jurong Island.

Japan's Mitsubishi Heavy Industries (MHI) is also exploring the potential of ammonia in Asia, having concluded a memorandum of understanding to look into developing a 100% ammonia direct combustion power plant on Jurong Island. This will study the possibility of setting up a plant that could produce carbon-neutral electricity and help stimulate ammonia demand in preparation for the expected need for ammonia bunkering.

Meanwhile, trading firm Itochu has signed an initial agreement with power producer Malakoff Corporation Berhad to potentially develop an ammonia terminal in the Johor Straits between Singapore and Malaysia.

And in Australia, Kanfer Shipping and Oceania Marine Energy have signaled their intention to bring the world's first ammonia-ready LNG bunkering vessel to the country, as they look to develop the zero-emission shipping industry.

Dual-fuel technology 

Dual-fuel technology is expected to be an efficient method of progressively introducing ammonia as a bunker fuel. Mitsubishi Shipbuilding, an MHI group company, has completed the conceptual design of an LPG-powered very large gas carrier that can be converted to run on ammonia, allowing shipowners fuel flexibility and lowering costs by enabling smaller-scale retrofitting.

Ammonia's bunker fuel pathway

The path to ammonia-powered ships is not without obstacles: issues relating to costs, safety and the need for a full and sustainable value chain will need to be addressed. But ammonia is increasingly seen as a potential bunker fuel of the future.

And given Asia's extensive ammonia terminal network and the flurry of commitments from industry, ammonia could become a sustainable alternative that helps marine vessels break their long-held dependence on fossil fuels.

ONE LINE adds new SIG service from Southeast Asia to India and Gulf

ONE LINE adds new SIG service from Southeast Asia to India and Gulf

Ocean Network Express (ONE) has announced a new addition to its extensive service network connecting Southeast Asia with India and the Middle East. 

The new SIG service will provide its customers with more frequency and comprehensive connections to and from India West Coast and Middle East. 

The SIG service rotation is as follows: Singapore - Nhava Sheva - Mundra - Dammam - Jebel Ali - Cochin - Colombo - Singapore

The SIG service will commence with a westbound ETA in Singapore on November 16, 2023.

 

The WCO presents its new mobile application "HS Browse & Check

The WCO presents its new mobile application "HS Browse & Check"

The World Customs Organization (WCO) presented its new mobile application "HS Browse & Check", a mobile application designed to provide customs professionals and international trade enthusiasts with convenient access to the Harmonized System (HS) 2022. 

Complementing WCO Trade Tools (wcotradetools.org) which provides tools for quick classification and other complimentary content, the mobile app has been designed to ensure a quick verification of any H.S. code and the navigation within the entire HS 2022

Developed by the WCO, the HS Browse & Check App provides a user-friendly platform to quickly access the content of HS 2022, including Legal Notes, Explanatory Notes, and Classification Opinions, all from the convenience of your mobile device. Say goodbye to the hefty 15kg of the paper version and have now everything at your fingertips! 

The app's intuitive search feature allows users to swiftly verify HS codes, and access instantly its associated content in its most recent version. This functionality ensures customs professionals and traders have immediate access to accurate information, providing valuable guidance and clarification on the interpretation and application of HS codes.

Mastering the HS is crucial for efficient trade operations, compliance with international regulations, and well-informed decision-making. The HS Browse & Check App aims to equip users with the knowledge and tools required to achieve these objectives seamlessly. whenever and wherever you need it. This application is available free of charge. Explanatory notes and Classification Opinions are accessible exclusively to users that already have a subscription on www.wcotradetools.org ensuring uninterrupted access to the Harmonised System.

Whether users are on the move or at their desks, this app will keep them connected to the latest updates of the HS content.

HS 2022 app is available now for download on both the App Store and Google Play!

For more information about the HS Browse & Check App visit www.wcotradetools.or 

Direct shipping connection between Chennai and China

DP World Chennai hosts inaugural call for FIX1 service

A direct container shipping connection will be available for the trade between Chennai and China with DP World, hosting the inaugural call for the Far East India Express (FIX1) service at its terminal in Chennai. This is the first-ever service to establish a direct shipping connection between Chennai and China, reducing transit time by eight days, by bypassing traditional transshipment ports, says a release.

The service launched on September 11 is a collaborative endeavour involving four consortium partners, with Sinotrans deploying two vessels and TS Line, Sealead, and SITC each contributing one vessel to the fleet.

The service’s rotation is designed to optimise the supply chain efficiencies, covering Ports Qingdao, Shanghai, Ningbo, and Shekou ports in China, the Chennai and Vizag ports in India, and Port Kelang in Malaysia (East Bound).

The FIX1 service will be the third weekly service sailing from DP World Chennai for the East region. The service’s key beneficiaries will be the large enterprises along with the SME and MSME clusters across the South and East Indian states of Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, West Bengal, Bihar and Odissa.  DP World’s extensive multimodal network will allow these clusters to link with the port terminal via road and rail connectivity.

India lifting Cabotage laws to Boost Coastal shipping

In the biggest reform yet in the shipping sector, the Narendra Modi led government plans to totally remove a so-called cabotage rule for ships carrying all types of cargo on local routes, a move that will allow foreign registered/flagged ships to do business along the country’s coast without securing a licence from theDirectorate General of Shipping. 

India is planning to completely remove its cabotage laws which will allow foreign registered and flagged ships to work along its coast without obtaining a permit from the country’s Directorate General of Shipping.

This is seen as a major move by the Narendra Modi-led government as the only ships currently allowed to work on local routes for carrying cargo are registered in India. Foreign ships can work along the coast only with an appropriate permit. When it came into force, the law was intended to protect domestic shipowners.

According to local media, this is seen as the biggest reform yet in the shipping sector but also a topic that will undoubtedly rile up Indian fleet owners.

India’s finance minister Nirmala Sitharaman said earlier this year that coastal shipping would be promoted as the energy-efficient and lower-cost mode of transport both for passengers and freight, through public-private partnerships with viability gap funding.

ET Infra, a news website, cited a document from the country’s Ministry of Ports, Shipping, and Waterways which claimed that to promote a higher percentage of coastal shipping in the transportation mix, the focus should be on enhancing ports and jetties, improving port connectivity, determining suitable vessel types and capacities as well as mitigating financial burdens of multimodal transportation.

This, according to the document, would encourage a shift from road and rail transport to coastal shipping and eventually benefit end users. Infrastructure upgrades will, the Ministry believes, be essential for the shipping and transport of commodities like coal and fertilisers while a further promotion of coastal shipping will benefit other bulk cargo transport like iron ore, steel, and food grains.

Coastal shipping only has a 7% share in India’s transportation mix while road and rail hold 62% and 31% stakes, respectively.

Current cabotage rules have been relaxed from what was in the initial law due to India not having an adequate number of certain vessels.

Foreign-flagged ships can transport export-import laden containers meant for transhipment, empty containers meant for re-positioning, agriculture, horticulture, fisheries, fertiliser and animal husbandry commodities on domestic routes without a license from the Directorate General of Shipping.

Also, RO-RO, RO-PAX, hybrid ro-ro, PCCs, PCTCs, LNG vessels, over-dimensional vessels, and project cargo vessels were allowed to operate in India’s coastal trade without a permit.

The Jigsaw puzzle : India’s trade ties with China

Over the years, China has emerged as the epicentre of the global supply chain. Notwithstanding the on-going trade war between China and the US, the pandemic, and the clamour for “China-plus-one” strategy, the key role of China in global merchandise trade seems unaffected. While many countries were not at ease with over-dependence on China for their imports, China continues to be a key trading partner for diverse countries all over the world. India is no exception.

Why China is Important for India

India’s trade with China is important because, for the last 15 years, China has been India’s top source of imports. In 2007-08, China’s share in India’s imports was around 10.8 per cent. It gradually went up and reached 16.4 per cent in 2017-18. It languished around 13.7 per cent for 2018-19 and 2019-20, but in the two post-Covid years (viz., 2020-21 and 2021-22), China’s share in India’s imports reached 16.53 per cent (record high) and 15.43 per cent, respectively.

To put these numbers in perspective, in these two years, the second biggest source of imports for India was the UAE, with an import share of 6.7 per cent in 2020-21 and 7.31 per cent in 2021-22. These numbers indicate that China is not only India’s biggest source of imports, but its share in total Indian imports is also more than double that of the UAE.

Secondly, in total non-oil merchandise imports, China’s dominance is even more pronounced. As oil imports account for 25-30 per cent of India’s total imports, India’s dependence on China for non-oil imports can be as high as 25 per cent or more.

India’s imports from China

Interestingly, the slowdown in China and the massive supply disruptions have not reduced China’s share in India’s total imports. In fact, the import shares seem to have gone back close to the pre-Covid peaks (see chart) . Moreover, in absolute terms, India’s imports from China during the pre-Covid years were $76 billion in 2017-18 and $70 billion in 2018-19. These numbers for 2020-21 and 2021-22 are $65 billion and $94.5 billion, respectively.

This shows that in absolute terms, India’s imports from China in 2021-22 is significantly higher than its pre-Covid level of imports. Data for the period April 2022 to February 2023 show that India’s total imports from China have already crossed $90 billion. In terms of commodity basket, India primarily imports the following items from China — electrical and electronic goods, organic chemicals including pharmaceuticals, and plastic items.

Together, these four categories make up more than 70 per cent of India’s imports from China. Also, imports of these items by India from China have gone up in the post-Covid period. Interestingly, China is a big market for Indian exports, as well. China has been among the top four export markets for India in the last few years. After Covid, India’s exports to China have gone up.

However, as imports from China are much bigger, India’s bilateral trade deficit with China is large and growing. In 2021-22, India’s trade deficit with China was around $73.3 billion (see table). It is expected to cross $100 billion in FY23, going by China’s customs data for 2022. India’s trade deficit with China accounts for 38-40 per cent of India’s total merchandise trade deficit in the post-Covid era (see table).

Do the large trade deficit numbers raise any cause for concern? 

Per se, running a trade deficit with another country is not necessarily undesirable. Imports can be useful as they can bridge the gap between domestic demand and supply of some goods. Imports of cheap raw materials and intermediate goods can help domestic competitiveness. The principle of comparative advantage precisely says this. Also, imports may give access to better technology and apart from the usual gains from trade, cheaper imports can also keep domestic inflation low. However, imports can be destabilising for a country’s domestic economy as they can displace domestic industries and can lead to premature deindustrialisation and unemployment.

Slower GDP growth

But apart from these reasons, the growing trade volume and increasing trade imbalance between India are intriguing for some special policy reasons. Since the Covid crisis, China is experiencing a slower GDP growth rate and has shifted its policies more towards domestic consumption. But these policy shifts do not seem to have dented Chinese exports to India.

Secondly, India has signed a number of free trade agreements (FTAs) with several East and Southeast Asian nations. International trade theory suggests that the signing of such trade agreements should have taken some market share away from China, which has not happened.

It is also notable that India withdrew from the Regional Comprehensive Economic Partnership (RCEP) before signing a deal and consequently, there is no FTA between India and China right now. This puts China at a disadvantage over other FTA partners of India. Finally, over the last few years, the government of India has taken several policy measures to improve import substitution.

But, despite all these developments and various conscious efforts by the government, India’s dependence on China does not seem to have waned. Admittedly, the effects of government policies may kick in with some lag. But, geopolitical and strategic differences between India and China may raise some concerns about the extent of India’s dependence on China in important and strategic industries. This warrants a deeper look at what India and China trade with each other.

Major shipping routes are struggling with water shortages

Major shipping routes are struggling with water shortages. El Niño could make it worse

An increasing number of climate-driven extreme weather events is taking its toll on the world’s major shipping routes — and El Niño could make matters worse.

In drought-stricken Panama, low water levels have prompted the Central American country to reduce the number of vessels that pass through the critically important Panama Canal.

The restrictions have created a logjam of ships waiting to traverse the route, which many companies favor, as it typically slashes the travel time between the Atlantic and Pacific Oceans.

The Panama Canal Authority, which manages the waterway, said earlier this month that the measures were necessary because of “unprecedented challenges.” It added that the severity of this year’s drought had “no historical precedence.”

The Panama Canal pile-up comes shortly after the U.N. weather agency declared the onset of El Niño, a major climate phenomenon that is likely to pave the way for a spike in global temperatures and extreme weather conditions.

Peter Sands, chief analyst at air and ocean freight rate benchmarking platform Xeneta, said maritime chokepoints exist “all over the place,” but that typically only calamitous events such as the 2021 Suez Canal obstruction tend to expose the fragility of the “just-in-time” delivery model.

“I think global shipping is like the world’s largest invisible sector,” Sands told CNBC via videoconference. “We all rely on services and the goods carried by sea, but we hardly ever get to think about how they end up on the shelves — unless something goes wrong.”

The Ever Given, one of the world’s largest container ships, ran aground for almost a week in March 2021 while contending with strong winds. The obstruction halted all traffic on one of the world’s busiest trade routes, causing massive disruption between Europe, Asia and the Middle East.

Analysts have since warned that extreme weather driven by the climate crisis could increase the frequency of Ever Given-like events, with potentially far-reaching consequences for supply chains, food security and regional economies.

Addressing the unusually long delays at the Panama Canal, Sands said that, while the ACP has previously imposed restrictions on ships due to low water levels, the onset of El Niño could exacerbate the problem.

“What we see right now is perhaps only the starter of the main course that is being served next year because it could be [a] more severe drought when we get to the first half of 2024,” Sands said, citing the impact of El Niño.

“Right now, we do not see that filling up of the water levels that a normal year would bring around. So, it is literally a potential disaster in the making,” he added.

El Niño — or “the little boy” in Spanish — marks the warming of the sea surface temperature, a naturally occurring climate pattern which takes place on average every two to seven years.

The effects of El Niño tend to peak during December, but the impact typically takes time to spread across the globe. This lag is why forecasters believe 2024 could be the first year when humanity surpasses the key climate threshold of 1.5 degrees Celsius. Global average temperatures in 2022 were 1.1 degrees Celsius warmer when compared to the late 19th century.

Falling water levels

Danish shipping giant Maersk said it had been “largely unaffected” by the Panama Canal delays, although it warned that climate risks to major shipping routes were becoming more prevalent with potentially severe impacts.

“We have actually had to deal with some of this back from the 1990s,” Lars Ostergaard Nielsen, head of the Americas liner operations center at Maersk.

“I think the difference is that it is perhaps becoming more prevalent, it is more perhaps severe, if you like, in terms of the impact today.” 

Referring to low water levels and the restrictions in place on the Panama Canal, Nielsen said the drought is prompting Maersk to load approximately 2,000 containers fewer than usual on the same vessel.

Typically, Nielsen said container ships might need to comply with a maximum depth of 50 feet on the Panama Canal. Current restrictions require ships to adhere to 44 feet of draft, forcing container ships to either weigh less or transport fewer goods.

“Six feet of water, that makes a big difference,” Nielsen said.

While the Panama Canal is likely to be one of the shipping routes most exposed to climate vulnerabilities, it is not the only waterway struggling to cope with the effects of extreme weather.

Low water levels on the Rhine river, an important trade route that runs through Germany via European cities to the port of Rotterdam, is also of concern.

Ships sail across the Rhine at Bacharach in Rhineland-Palatinate.

Ships sail across the Rhine at Bacharach in Rhineland-Palatinate.

Picture Alliance | Picture Alliance | Getty Images

In late July, water levels at Kaub — a measuring station west of Frankfurt and a key chokepoint for water-borne freight — dropped to their lowest on a year-to-date basis.

Falling water levels on Europe’s busiest waterway have become a regular occurrence in recent years, making it more difficult for vessels to transit at capacity and increasing shipping costs.

“On the Rhine … it’s basically more daily tactical decisions simply because it’s short trips [and] it’s relatively easy to find alternatives so you can actually deal with that quite late in your processes,” Nielsen said.

“Whereas [with the] Panama Canal, you really have to plan it quite early because by the time you have a crossed the Pacific etcetera, you don’t really have any other options once you arrive,” he added.

Climate risks

Global insurance broker Marsh warned in a report published late last year that greater focus should be given to understanding the vulnerabilities of maritime chokepoints, given the increasing incidence of climate-driven disruptive weather events.

In the case of the Suez Canal, Marsh cited coastal inundation — where the sea level rises high enough to flood infrastructure — and the increasing chance of extreme heat as physical risks that will only be aggravated by the climate emergency.

If any of the five major waterways worldwide were disrupted by accidents or political events, analysts at Marsh said the impacts will be felt far beyond global supply chains. The broker recognized these five major waterways as the Suez and Panama Canals, the Malacca Strait between Indonesia and Malaysia, the Strait of Hormuz between Iran and Oman and the Bab-el-Mandeb between Djibouti and Yemen.