15 vessels worth over 20 billion yuan! COSCO SHIPPING Group will build methanol-fueled container ships

Maersk's investment in methanol fuel is attracting more and more shipping companies to follow suit. Following CMA CGM, COSCO SHIPPING Group is expected to invest more than 20 billion yuan to order up to 15 methanol-powered ultra-large container ships, which will also be COSCO SHIPPING Group's first investment in dual-fuel ships.

COSCO SHIPPING Holdings will order 15 methanol-fueled 10,000-TEU container ships, its first dual-fuel order.

According to TradeWinds, COSCO SHIPPING Holdings, the listed platform for container shipping services under COSCO SHIPPING Group, is in deep discussions with Yangzhou COSCO SHIPPING Heavy Industry to order 6 methanol dual-fuel 23,000 TEU ultra-large container ships and 9 conventionally powered but methanol-ready 15,000 TEU new Panamax container ships.

Shipbrokers estimate that each 23,000 TEU methanol dual-fuel ship will cost at least US\$230 million, while a conventionally powered but methanol-ready 15,000 TEU ship will cost about US\$170 million, for a total value of approximately US\$2.91 billion (approximately RMB 20.28 billion). These new ships are expected to be delivered and put into operation starting in 2025.

If the news is true, COSCO SHIPPING Group will become the third shipping company to invest in the construction of methanol-powered container ships, following Maersk and CMA CGM. In addition, the methanol-powered ships previously ordered by Maersk and CMA CGM are all 15,000-16,000 TEU new Panamax ships, which means that COSCO SHIPPING Group's order will break the record for methanol-powered container ships.

If the contract takes effect, this will also be the largest container ship order ever undertaken by Yangzhou COSCO SHIPPING Heavy Industry. Clarkson's data shows that Yangzhou COSCO SHIPPING Heavy Industry has mainly built bulk carriers in the past, and the largest container ships it has delivered are two 9,452 TEU ships for CMA CGM in 2018. In 2021, Yangzhou COSCO SHIPPING Heavy Industry undertook the construction of 6 14,092 TEU container ships and 4 16,180 TEU container ships for COSCO SHIPPING Holdings, and in March this year, it received an order for 2 700 TEU electric container ships from COSCO SHIPPING Development, marking the first time Yangzhou COSCO SHIPPING Heavy Industry has built alternative fuel container ships.

As one of the world's top four shipping giants, COSCO SHIPPING Group is the only one that has never been involved in any dual-fuel ships. Mediterranean Shipping Company has ordered a series of LNG-powered ships, Maersk ordered the world's first batch of methanol-powered container ships last year, while CMA CGM has both LNG-powered and methanol-powered ship orders on hand.

Since 2020, COSCO SHIPPING Holdings has ordered a total of 32 container ships from COSCO SHIPPING Group's shipyards through its wholly-owned subsidiary COSCO SHIPPING Lines and indirectly held subsidiary Orient Overseas. In 2020, Orient Overseas ordered the first batch of 12 23,000 TEU ultra-large container ships from Nantong COSCO SHIPPING Kawasaki and Dalian COSCO SHIPPING Kawasaki, marking the first time COSCO SHIPPING Group joined the ranks of 23,000 TEU ultra-large ships.

In July 2021, COSCO (Cayman) Mercury Limited, an indirectly wholly-owned subsidiary of COSCO SHIPPING Holdings, signed a contract with Yangzhou COSCO SHIPPING Heavy Industry for the construction of 10 new Panamax container ships; in September of the same year, Orient Overseas signed shipbuilding agreements with Nantong COSCO SHIPPING Kawasaki and Dalian COSCO SHIPPING Kawasaki, ordering 10 16,000 TEU container ships.

All 32 of COSCO SHIPPING Group's container ships use traditional power and are expected to be delivered between 2023 and 2025. Alphaliner's data shows that COSCO SHIPPING Group currently operates a fleet of 464 container ships with a total capacity of 2.8725 million TEU, including 177 owned ships and 287 chartered ships, ranking fourth globally. At the same time, COSCO SHIPPING Group also has 34 new ships under construction totaling approximately 586,700 TEU, with orders on hand accounting for 20.4% of the existing fleet.

Skipping LNG fuel? Methanol power is increasingly becoming the preferred choice for shipping giants when ordering ships.

As the shipping industry accelerates its decarbonization process, methanol has been widely discussed as an alternative fuel. Last year, Maersk took the lead in ordering one 3,500 TEU and twelve 16,000 TEU methanol-powered container ships from Hyundai Heavy Industries Group in South Korea, becoming the world's first company to build methanol-powered container ships. In Maersk's view, green methanol is the only currently marketable low-carbon fuel in the shipping industry.

Earlier this year, CMA CGM, which has long supported LNG-powered ships, also decided to invest in methanol fuel, planning to order 6 15,000 TEU methanol dual-fuel ships and reaching an agreement with China State Shipbuilding Corporation. The new ships will be delivered in the second half of 2025, with each costing approximately US\$175 million. This is CMA CGM's first order for methanol-powered container ships and the world's second order for methanol-powered 10,000-TEU ships.

CMA CGM was one of the earliest shipping giants to invest in LNG power. Currently, CMA CGM has 29 LNG-powered container ships in operation, and this number will increase to 77 by 2026. CMA CGM has always been the world's largest shipping company investing in LNG fuel, so its order for the first batch of methanol fuel ships has attracted much attention.

CMA CGM stated in its first-quarter report that the first methanol-powered ship order is in line with the company's strategy to expand its energy structure, aiming to achieve net-zero emissions by 2050; to this end, CMA CGM is accelerating its decarbonization trajectory through large-scale investment in LNG and methanol fuels. In the coming years, these two areas will complement each other, driving the decarbonization of the shipping industry.

In addition, ONE (Ocean Network Express) is also considering the application of methanol fuel. At the end of May, ONE announced an order for 10 13,700 TEU new Panamax container ships, which are planned to be designed with ammonia or methanol fuel readiness.