Fuel Switch Snapshot: LNG crosses $1,000/mt with EU regs

LNG can cost $1,000/mt with EU regulations added

B100 premium over VLSFO rises

Rotterdam’s VLSFO-equivalent LNG price has surged $41/mt higher in the past week.

This sharp increase has further widened its premiums over conventional fuels. Its premium over VLSFO has gone up by $36/mt to $242/mt, and over LSMGO by $52/mt to $146/mt.

With EU Allowance (EUA) and FuelEU Maritime costs for voyages between two EU ports added, bunkering LNG in Rotterdam will now cost over $1,000/mt on ships powered by Otto medium speed (Otto MS) engines. This engine type has the highest default methane slip (3.1%) in the FuelEU regulation.

Few shipowners have a direct choice between liquefied biomethane (LBM) and B100, as these fuels typically serve different vessel types and operational needs. But for dual-fuel shipowners bunkering in Rotterdam with that choice, LBM's cost advantage over B100 has increased when additional EU regulation costs are factored in.

For ships with Otto MS engines, LBM’s discount to B100 has widened to $25/mt when accounting for EU ETS compliance costs and FuelEU pooling benefits. This is an $11/mt increase from a week ago.

Liquid fuels

Rotterdam's VLSFO-equivalent B100 price has surged by $60/mt in the past week, increasing its premium over VLSFO by $51/mt to $626/mt.

PRIMA Markets has assessed the Dutch HBE rebate for B100 in Rotterdam to $357/mt, a modest $7/mt decline in a week of slow activity, PRIMA said.

“The market for HBE tickets flattened on Friday in what market participants called a quiet market, with some even suggesting they were 'bored', both for 2024 and 2025,” PRIMA said.

The theoretical FuelEU pooling value we assume for B100 has increased by $9/mt on the week, to $562/mt. When factoring in estimated EU ETS and FuelEU compliance benefits for voyages between two EU ports, the real cost of bunkering B100 is $722/mt. That is a $52/mt gain on the week.

Meanwhile, Rotterdam’s VLSFO price has countered a $21/mt ($2.83/bbl) drop in front-month Brent futures by gaining $5/mt over the past week. Singapore's VLSFO price has fallen by $6/mt.

Liquid gases

Rotterdam’s LNG price has rallied for another week. Its $41/mt weekly gain has mainly been driven by concerns over colder weather and low wind power output in Europe.

LNG’s sharp rise has also driven up the price of LBM, which is typically priced at a premium over fossil LNG.

When factoring in compliance costs and pooling benefits, the total cost of bunkering LBM can be as low as $562/mt when it is consumed in a diesel slow speed (diesel SS) engine with low methane slip (0.2%) between two EU ports. That is $275/mt less than fossil LNG consumed in the same diesel SS engine.

Meanwhile, Singapore’s VLSFO-equivalent LNG price has been rather steady, shedding $2/mt in the past week.

By Konica Bhatt

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