MEOH - The Case For Methanol As A Future Fuel
Summary
- There is an ongoing dilemma in the international shipping community: which renewable fuel solution holds the key to the industry’s green future?
- Focus has centered on fuels that can be produced using renewable electricity, known as e-fuels.
- E-fuels include ammonia, methanol, and hydrogen. Each type of e-fuel has its own benefits and drawbacks. In the long term, it’s unclear which is better for the industry.
By Breakwave Advisors
There is an ongoing dilemma in the international shipping community: which renewable fuel solution holds the key to the industry’s green future? Focus has centered on fuels that can be produced using renewable electricity, known as e-fuels. E-fuels include ammonia, methanol, and hydrogen. Each type of e-fuel has its own benefits and drawbacks. In the long term, it’s unclear which is better for the industry.
Compatibility with combustion engines makes e-fuels a practical route to eliminate vessel emissions. Shipping is considered a hard-to-abate sector due to the immense power requirement of ships operating trans-continental trade routes. A renewable power solution for ships will need to be widely available near ports worldwide and economically practical. These are not small hurdles.
E-fuel Value Chain Source: Breakwave Advisors
Two leading shipowners have recently favored methanol, giving it a boost in attention. French container line CMA CGM began placing orders for methanol-powered ships in June 2022, and has tallied up 18 ships under construction in addition to 31 methanol-ready vessels already operating in its fleet.
CMA CGM is in good company. Danish shipowner A.P. Moller-Maersk ( AMKBY ) has 19 methanol-powered containerships on order and has taken steps to secure renewable methanol offtake agreements.
Maersk needs a sizeable amount of methanol for its ships, but renewable methanol production is just beginning to take shape, making this a challenge. Maersk has had some success, contracting 130,000 tons of renewable methanol for delivery in 2023 , 700,000 tons in 2025, and 500,000 tons in 2026.
Source: Methanol Institute, Bloomberg, 2023.
But why methanol fuel?
Methanex ( MEOH ), a Canadian company that produces and distributes methanol, began using methanol as ship fuel in 2016 demonstrating methanol’s commercial viability for powering large cargo ships.
Stena Line, one of the largest ferry operators in the world, also has a track record of using methanol. Stena first implemented methanol in 2015 to power ferries and was able to achieve a reduction of emissions by using the fuel. Methanol is currently available in over 100 ports .
Methanol is also already being commercially produced using renewable electricity but in small quantities. Carbon Recycling International ((CRI)), a private Icelandic company that uses geothermal power to produce renewable methanol, first began production in 2012. Since then, CRI has received more than 180 inquiries from stakeholders interested in renewable methanol. The company says it is prepared to deploy its technology “en masse.”
Even with a proof-of-concept, there are still major challenges. Obtaining an adequate supply of renewable electricity, developing production infrastructure at scale, and solidifying a distribution network are significant undertakings. But researchers are already developing technologies that will resolve these issues.
ETFMG Breakwave Sea Decarbonization Tech ETF ( BSEA ) provides exposure to many of the companies involved in making methanol a viable fuel for the shipping industry, including Aker Horizons (Norway) ( AKHOF ), Alfa Laval (Sweden) ( ALFVF ), GTT (France) ( GZPZF ), Methanex (Canada), OCI (Netherlands) ( OCINF ), Orsted (Denmark) ( DNNGY ), Royal Vopak (Netherlands), Technip Energies (France) ( THNPY ) and Wartsila (Finland) ( WRTBF ).
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-800-889-1438), or by visiting www.etfmg.com/BSEA. Please read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the Marine Money Decarbonization Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The Index was created by and is owned and maintained by Maritime Transformation Partners, LLC (the “Index Provider”), which has not previously been an index provider, which may create additional risks for investing in the Fund.
Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security.
Specific investments described herein do not represent all investment decisions made by Maritime Transformation Partners, LLC or ETF Managers Group LLC. The reader should not assume that investment decisions identified and discussed were or will be profitable. Specific investment advice references provided herein are for illustrative purposes only and are not necessarily representative of investments that will be made in the future.
ETF Managers Group LLC is the investment adviser to the Fund.
The Fund is Distributed by ETFMG Financial, LLC, Member FINRA/SIPC. ETF Managers Group LLC and ETFMG Financial LLC are wholly owned subsidiaries of Exchange Traded Managers Group LLC (collectively, “ETFMG”). ETFMG is not affiliated with Maritime Transformation Partners, LLC or Breakwave Advisors LLC.
The Fund is intended to be made available only to U.S. residents. Under no circumstances is any information provided on this website intended for distribution to or use by, or to be an offer to sell to or solicitation of an offer to buy the Fund or any investment product or service of, any person or entity in any jurisdiction or country, other than the United States, where such distribution, use, offer or solicitation would subject the Fund or its affiliates to any registration requirement or be unlawful under the securities laws of that jurisdiction or country.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
The Case For Methanol As A Future Fuel