Company: ASC
Filing Date: 2025-03-07
Form Type: 20-F
Source: 0001558370-25-002500
Chunk: 65

Company: Ardmore Shipping Corp
Filing Date: 2025-03-07
Form: 20-F
Item: Item 4
Chunk 65
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 shipping, apart from some other elements.

Alternative Fuels for Shipping

The IMO aims for net-zero emissions from the shipping industry by 2050. This can’t be achieved with existing fuels and so has encouraged innovation in alternative fuels.

The IMO has also been planning other technical and operational measures in order to meet emission targets. Alternative fuels like LPG and methanol are mainly used on vessels carrying these as cargo while LNG is used as a fuel in LNG vessels and also in other vessels. While Hydrogen is in the initial stages of development as a marine fuel, Ammonia as a marine fuel is making slow progress due to skepticism regarding its toxicity.

LNG is expected to remain a preferred alternative fuel in the near to medium term due to its availability. However, LNG is still a fossil fuel and is unable to meet the IMO 2050 decarbonization target. Another drawback is that LNG propulsion requires an LNG capable engine which would require additional capex and increased fuel storage space. Biofuel is another potential alternative fuel because it requires no major engine modification, and therefore, no significant additional capex is required.

Table of Contents

Energy Transition

Oil demand growth is projected to persist in the coming years due to the slower than expected energy transition and as energy security has become a greater focus. Several oil majors are increasing their capital expenditure on oil and gas projects while reducing their expenditure on renewable energy projects.

However, as the cost of EVs becomes competitive against internal combustion engine vehicles, and charging infrastructure is developed across the world, EVs as a percentage of the automotive fleet is forecast to increase, reducing demand for gasoline and diesel in the long run. While the focus on decarbonization may impact global oil demand, the demand for naphtha and jet fuel is likely to remain robust.

The Product Tanker Freight Market

In 1Q 2024, spot rates got a boost due to Red Sea disruptions with many Europe-bound tankers avoiding the Suez Canal and being diverted to a significantly longer route via the Cape of Good Hope. However, they declined in the following quarters and reached a yearly low in September mainly due to weak demand, a reduction in east-west trading activity, and crude tankers entering the clean petroleum products (CPP) trade. Meanwhile, time charter rates continued to fall and reached a yearly low in December.

The Russia-Ukraine conflict, which started in 2022, resulted in a shift from short-haul trade between Europe and Russia to long-haul trade between Europe and the Middle East/U. S., thus