Pacific Basin CEO: If we knew what to order we would
As the decarbonization push gains pace, uncertainty over the future of marine fuels is hindering investments in new ships. But rather than taking a wait-and-see approach, ship owners are joining industry partners to get a better insight into the current fuel market situation and outlook in order to help them define their pathway to becoming net-zero.
While LNG, methanol, and increasingly ammonia are sparking greater interest, there are numerous challenges to be addressed regarding availability, safety and profitability.
There is no time to waste, as explained by Martin Fruergaard, CEO of Pacific Basin during a recent earnings call because the clock is ticking to meet the 2050 net-zero targets.
However, the Hong Kong-based dry bulk shipping company still hasn’t decided on its future ship designs or the types of fuel those ships would burn.
“If we knew exactly what to order we would order as soon as possible,” Fruergaard said.
“The challenge is not so much about the technology on board the ships, but rather what kinds of fuel to use and availability of those fuels. That’s why we made a partnership with Nihon Shipyard and Mitsui because we believe that the three partners, coming into the cooperation with different backgrounds and knowledge, can get to the end goal faster than by doing it alone.”
To remind, in May 2020, Pacific Basin signed a memorandum of understanding (MoU) with Japanese shipyard Nihon Shipyard and trading and investment company Mitsui to work on the development of zero-emission vessels.
The partners vowed to explore the investment in related bunkering infrastructure.
Commenting on the recent cooperation, Fruergaard noted that the project has started and that the partners are now evaluating the available fuels and defining which one would be the most suitable for the company moving forward.
“If by 2050 we have to be net zero, we don’t have forever to start building ships. Therefore, as a company, we have the same challenge as the industry in general,” he noted, adding that it will likely take some years before the company gets a new zero-emission design.
“But, we also have to look at the ships we have today, and they will have to be traded for a long time in order to service the customers and we can not just change them out.
“Our agenda, together with our partners is to make sure we know what we are doing and, as soon as we have some certainty on availability of fuels and how to design the ship safely, our ambition is, of course, to order such ships”
“We at Pacific Basin know that we have to decarbonize. The ambition is not to be the first but to be able to do it right and safely.”
The company expects new ship ordering to remain restrained until vessel designs for clean fuels (such as ammonia and methanol) and associated bunkering infrastructure become commercially available.
According to Pacific Basin, IMO 2023 regulations will not start forcing slower speeds and higher scrapping until 2024 at the earliest.
At the moment, vessel speeds in the dry bulk shipping business remain elevated leaving limited scope to increase vessel capacity through faster speeds, while Covid-related inefficiencies around the world, particularly in China, have further constrained the availability of tonnage to meet global demand.
In the first half of 2022, Pacific Basin posted its best interim results ever, producing an underlying profit of $457.5 million, and a net profit of $465.1 million.