[Going to Net Zero No.1] 'Hybrid Ships' to Replace Regulations... Global Shipping Companies' Love Call

<4> Korea's Shipbuilding Success in Europe
Following EU Greenhouse Gas Emissions Trading System
Up to $390,000 Burden per Ship Starting Next Year

Hyundai Samho Heavy Industries delivered a large liquefied natural gas (LNG) powered container ship to Singapore's EPS in September 2020.

[Asia Economy Reporter Choi Dae-yeol] The world's largest shipping company, Denmark's Maersk, signed a contract last August with Korea Shipbuilding & Offshore Engineering to build eight 16,000 TEU (1 TEU equals one 20ft container) class container ships powered by methanol fuel. Two months earlier, in June, they placed a pilot order for smaller (2,100 TEU class) container ships to test the feasibility, and after internal and external reviews, they judged that methanol propulsion could be sufficiently applied to large vessels as well.

Methanol emits fewer pollutants such as sulfur oxides compared to conventional ship fuels and is easier to store, but currently, its supply network is not widely established, making production costs high. Maersk solved this challenge by agreeing to receive carbon-neutral methanol produced using wind and solar power from domestic energy companies.

Previously, Hyundai Heavy Industries Group had built some ship types, such as product carriers (PC ships), equipped with methanol propulsion engines, but this is the first time a shipping company operating mainly container fleets is building large vessels powered by methanol. Container ships consume fuel two to three times more than bulk carriers or tankers of similar size. For shipping companies, fuel costs are a burden, but they also emit significantly more pollutants.

Following the International Maritime Organization (IMO), the European Union (EU) has also decided to strengthen environmental regulations on maritime transport. Additionally, cargo owners like IKEA and Amazon, who contract with shipowners, have started tracking carbon emissions during product transportation, increasing the need for global shipping companies like Maersk to take proactive measures.

Maersk emits 33.9 million tons of greenhouse gases annually (based on 2020 CO₂ equivalent). Compared to 2008, this has been reduced by about half, but further reductions are required going forward. Palle Laursen, Maersk's Chief Technology Officer, said, "Through unique design, we can improve energy efficiency per transported container by 20% and reduce annual CO₂ emissions by 1 million tons."

Only Korea Can Meet Deadlines for Eco-Friendly Specifications
Orders Flood for Dual-Fuel Ships Using LNG Alongside Conventional Fuel

Among the top five global shipping companies, four are based in Europe (Maersk, MSC, CMA CGM, Hapag-Lloyd), with a market share exceeding 40% by fleet capacity. European shipping companies' active response to climate change and carbon neutrality is primarily due to environmental regulations, but the increasing cost burden is also significant.

There have been ongoing calls, mainly from international environmental organizations, to strengthen IMO-level environmental standards, and the EU has introduced its own regulations. A representative example is the Emissions Trading System included in the Fit for 55 package released in July last year. Previously applied to power generation and manufacturing sectors, it has now been extended to shipping. It starts in 2023 and the required coverage gradually increases.

According to estimates by Yang Jong-seo, Senior Researcher at the Korea Eximbank Overseas Economic Research Institute, under the emissions trading system, a large container ship will have to pay up to $390,000 per vessel in 2023 and $1.95 million by 2026. Even ship types with relatively lower emissions, such as tankers, are expected to bear costs of at least several hundred thousand dollars. Six major global marine insurers, including Swiss Re, have recently adopted the Poseidon Principles, which consider climate change factors when lending to shipowners or shipping companies.

The increasing visits of European shipping companies to Korean shipyards are also due to this background. Without reducing emissions of carbon, sulfur oxides, nitrogen oxides, and other pollutants, ships cannot access desired regions, and even if standards are met, the cost burden becomes significant. Eco-friendly ships costing billions of won per vessel must be procured, and Korean shipyards are virtually the only ones capable of building vessels with the desired specifications on schedule. The surge in orders for liquefied natural gas (LNG) dual-fuel propulsion ships, which are expected to serve as an intermediate step before transitioning to future eco-friendly fuels like renewable energy or hydrogen, centered on large Korean shipbuilders, is a clear example.

An LNG fuel tank is being installed on an LNG-powered ship under construction by Hyundai Heavy Industries. The independently developed standalone structure allows for fuel storage of 12,000 cubic meters.

According to industry sources, among the 226 vessels ordered last year by the three Korean shipbuilders (Hyundai Heavy Industries, Samho, and Mipo Shipyard), 73 were dual-fuel propulsion ships (58 LNG-powered). Daewoo Shipbuilding & Marine Engineering had 45 dual-fuel vessels out of 55 total orders, and Samsung Heavy Industries had 49 out of 80. This hybrid method, using conventional fuel alongside LNG, is gaining attention as a way to comply with current environmental regulations. Among Korea Shipbuilding & Offshore Engineering's first 10 orders this year, seven are LNG-powered ships. A company official said, "Due to the strengthening of global environmental regulations, interest and inquiries about eco-friendly ships have steadily led to actual orders since last year."

Additionally, Korea Shipbuilding & Offshore Engineering received basic certification for the conceptual design of an ammonia fuel supply system, which emits no CO₂ during combustion, last year, and is accelerating the development of various eco-friendly ships using electricity, hydrogen, and other technologies. Daewoo Shipbuilding & Marine Engineering anticipates that eco-friendly smart ship technology development will become increasingly important and has formed a global R&D consortium centered on academia such as MIT and Seoul National University, classification societies in the UK and Norway, and research institutes based in Europe and Korea.

Researcher Yang Jong-seo said, "Recent changes in ship fuels and propulsion systems are driven by demands to respond to the crises humanity faces, unlike past changes caused by technological innovation or demand shifts. This leads to high uncertainty as technological levels and economic feasibility are not fully considered. To prevent loss of competitiveness and seize new opportunities, cooperation rather than competition is necessary."