According to reports, Shenwan Hongyuan has stated that carbon reduction policies from the IMO and the EU are becoming more frequent, marking the onset of practical measures for decarbonizing the shipping industry. Materials for shipping decarbonization are entering a favorable phase. From a supply and demand perspective, as of August 2025, DNV estimates that the demand for biodiesel, LNG, and green methanol will be approximately 200 million tons, 40 million tons, and 6 million tons respectively, while supplies will only reach 70,000 tons, 10,000 tons, and 10,000 tons, highlighting a severe shortage of low-carbon fuel supply.

In terms of economics, compliance costs in the EU surpass those of the IMO and are increasing annually. The projected fuel plus compliance costs for the EU in 2025, 2030, 2040, and 2050 will be $741, $953, $1649, and $3014 per ton respectively. Under the IMO framework, VLSFO plus compliance costs are estimated to be $525, $583, and $1362 per ton in 2028, 2030, and 2040, respectively, which is expected to drive the demand for low-carbon fuels.

Shenwan Hongyuan’s main viewpoints are as follows: With frequent decarbonization policies from the IMO and the EU, the shipping industry is entering a practical implementation phase. The global shipping fuel consumption is approximately 300 million tons, corresponding to over 1 billion tons of carbon emissions (with the EU accounting for around 18%), representing about 3% of the global total.

The EU's policies include: 1) From 2024, the shipping industry will be included in the EU carbon market, with non-compliance resulting in fines of €100 per ton of CO2e; the FuelEU regulation requires a 2% reduction in carbon emissions starting in 2025, with penalties of €642 per ton of CO2e for non-compliance by 2050. 2) The IMO proposed a net-zero strategy for 2050 and approved a draft framework for net-zero in April 2025, indicating a unified carbon price of either $380 or $100 per ton of CO2e, which will substantially enhance shipping decarbonization efforts. 3) In China, green fuel pilots are underway, and consumption of green ammonia is included in renewable energy consumption targets. The target for ZNZ usage by 2030 is set at 5-10%, supported by rising compliance costs that will release ZNZ demand, though supply is expected to fall short.

From a supply-demand perspective, DNV’s data shows that by August 2025, the demand for biodiesel, LNG, and green methanol will be approximately 200 million tons, 40 million tons, and 6 million tons, respectively, while the supply of ship fuel is only at 70,000 tons, 10,000 tons, and 10,000 tons, revealing a serious shortage of low-carbon fuel supplies.

The economic situation shows that the EU's compliance costs are higher than those of the IMO and are increasing each year. The projected costs are as follows for the EU: 2025/2030/2040/2050 at $741/$953/$1649/$3014 per ton (for the IMO framework, VLSFO plus compliance costs in 2028/2030/2040 are expected to be $525/$583/$1362 per ton), which will stimulate the demand for low-carbon fuels.

It is worth noting that carbon pricing will cap the upper limit for ZNZ. The current price of green methanol is $6200 per ton, reliant on a carbon price of $380 per ton, highlighting the need to focus on cost reductions in the future. Comparatively, biodiesel presents greater economic viability (at $0.21/$0.31 per MJ).

Biodiesel is a core decarbonization measure for existing ships, with demand rising significantly due to increased port refueling. Existing vessels primarily use a single traditional fuel, making retrofitting costs extremely high and future carbon reductions heavily reliant on biodiesel. Singapore has seen a substantial increase in biodiesel refueling volumes since 2022, indicating that demand is gradually solidifying.

From the supply side, the global biodiesel production is around 52 million tons, primarily targeted at reducing emissions from diesel vehicles, with the rapid development of electric vehicles likely leading to a shift in biodiesel use towards maritime and other sectors that are difficult to electrify. Companies to watch include Zhuoyue New Energy (688196.SH) and Shanghai High-River Energy (000803.SZ).

Regarding biogas: The demand for LNG vessels is growing, while a green premium is anticipated to drive significant growth. RNG can substantially reduce carbon emissions, improve environmental conditions, and enhance energy security, with China's and the EU's 2030 production targets set at over 20 and 35 billion cubic meters, respectively. Historically, RNG development has been slow due to high costs, but with the implementation of the IMO net-zero framework and quality balance models, the realization of RNG green premiums is on the horizon—a notable example being Archaea's RNG green premium in the U.S. valued at up to 725%, potentially leading to sectoral expansion. Companies to observe include Weilisi (300190.SZ) and China Tianying (000035.SZ).

As for green methanol: The rapid growth of methanol vessels is expected to boost both supply and demand in the medium term. Currently, there are 406 methanol vessels (including orders) projected to correspond to a methanol demand of over 8 million tons, while the total operating capacity of global green methanol by the end of 2025 is only expected to reach 1.24 million tons, with China accounting for 730,000 tons, indicating a short-term supply shortage.

Despite plans for over 40 million tons globally in the medium term, many challenges must be addressed for practical implementation (certification, resources, technology, costs, etc.). Therefore, companies that can quickly deliver projects with cost and scale advantages are likely to benefit first, including companies such as Fujie Environmental (688335.SH), China Tianying (000035.SZ), Goldwind Technology (002202.SZ), Jidium Co., Ltd. (000875.SZ), Fuan Energy (002911.SZ), Hong Kong China Gas (00003), CIMC Enric Holdings (03899), and COSCO Shipping International (00517).

Risk warnings include the risk of policies failing to meet expectations, the risk that cost reductions for low-carbon fuels may not materialize, slower than anticipated project progress, and the risk of increased industry competition.