INTEGRATED ANNUAL REPORT 2024 56 57 SECTION 6: STRATEGIC REVIEW www.miscgroup.com MISC BERHAD SHORT TO MEDIUM TERM MEDIUM TO LONG TERM SHIPPING SECTOR What Happened in 2024 The conflicts in the Middle East continued to threaten key chokepoints in the Middle East, such as the Bab al-Mandeb Strait and Strait of Hormuz. This caused the shipping sector to continue avoiding high risk areas, opting to reroute via the Cape of Good Hope, which kept tonne-mile demand elevated. Despite geopolitical challenges, crude oil tanker rates in 2024 were less volatile than in the previous year, supported by sustained high tonne-mile demand from the ongoing shifts in global oil trade. The low new tanker deliveries, particularly for VLCC and Suezmax classes, also helped to keep the seasonal rates steady for most of 2024. Meanwhile, LNGC rates were subdued throughout the year, mainly due to high vessel supply amidst delays in new LNG liquefaction projects. Furthermore, the surge in LNGC newbuild deliveries towards the end of the year added downward pressure to the already weakened rates. Source: Clarksons (January 2025) LNGC Spot Rates Crude Tanker Spot Earnings 100,000 250,000 200,000 150,000 100,000 50,000 0 75,000 50,000 25,000 0 USD/day USD/day Suezmax Aframax VLCC Jan-2023 Jan-2023 Apr-2023 Apr-2023 Jul-2023 Jul-2023 Oct-2023 Oct-2023 Jan-2024 Jan-2024 Apr-2024 Apr-2024 Jul-2024 Jul-2024 Oct-2024 Oct-2024 Dec-2024 Dec-2024 160k cbm (TFDE) 145k cbm (Steam) 174k cbm (DFDE) Our Operating Environment How We Were Impacted and How We Responded The robust trade fundamentals and high tonne-mile demand kept the oil tanker rates supported and less volatile during the year. However, the LNGC market faced downward pressure on rates due to high vessel availability, driven by increased LNGC newbuild deliveries throughout the year. Nevertheless, our Petroleum & Products and GAS Business segments remained focused on securing long-term charter contracts while executing progressive fleet rejuvenation initiatives. In 2024, the Group successfully delivered a newbuild LNG dual-fuel VLCC, Eagle Veracruz, on a long-term charter contract with Shell. Additionally, the Group secured long-term time charter contracts for five new LNGCs. What Is the Outlook? In 2025, the rates for crude oil tankers will remain supported by the high tonne-mile demand derived from the ongoing trade shift. However, the rates are expected to decline in the medium term once new crude oil tankers are delivered within the next five years. Meanwhile, LNGC rates are expected to remain weak throughout 2025 as more new LNGCs will be delivered amidst high vessel availability and LNG liquefaction project delays. Once the new liquefaction projects are online, the rates for the modern fleet (DFDE and TFDE) are expected to increase, while the rates for steam vessels will remain subdued as charterers prefer newer, more fuel-efficient vessels that offer lower operational costs and reduced emissions. Nevertheless, demand for oil and gas tankers is expected to remain well supported, mainly due to high tonne-mile demand from continuous vessel rerouting and strong oil and gas demand growth, predominantly in Asia. For more information, please refer to Gas Assets & Solutions Business Review on page 78 and Petroleum & Products Business Review on page 81. SHORT TO MEDIUM TERM MEDIUM TO LONG TERM DECARBONISATION OF THE MARITIME INDUSTRY What Happened in 2024 The shipping industry operates within a multi-faceted regulatory environment, driven by the IMO and the EU. The overlap of international and government regulations creates a challenging operating environment for shipowners, particularly those with global operations. The stricter environmental regulations make it mandatory for shipowners to invest in modern, fuel-efficient and compliant vessels. This regulatory shift led to a surge in newbuild orders as shipowners replaced older vessels and adhered to evolving shipping requirements. With overall newbuild order volumes reaching their highest level since 2007, alternative fuel has continued to play a prominent role. In 2024, LNG as a marine fuel, accounted for more than 35% of total tonnage ordered across various vessel segments, followed by other alternative fuels such as ammonia, methanol and biofuel. Overall, newbuild orders with dual-fuel capability represented 50% of total tonnage ordered during the year. Our Operating Environment Key Capitals: Material Matters: Risks: Human H Physical P Financial F DFDE (Dual-Fuel Diesel Electric) TFDE (Tri-Fuel Diesel Electric) Ocean Health Security Climate Change Financial Performance Energy Management Health and Safety Financial Risk Market Risk Geopolitical Risk Asset Integrity and Performance Risk How We Were Impacted and How We Responded MISC 2030 Ambition sets a clear pathway towards achieving our 2050 Vision by pivoting to profitable new energy businesses while simultaneously strengthening and decarbonising our core operations. We remain committed to reducing our GHG emissions from shipping operations by 50% by 2030 and achieving Net-Zero GHG emissions by 2050. In 2024, the Group achieved a significant milestone in our decarbonisation journey with a 32% reduction of average GHG intensity from our fleet (Gas and Petroleum) compared to our 2008 levels. Additionally, the Group achieved another significant milestone with the signing of long-term TCPs between AET and PTLCL for the world’s first two ammonia dual-fuel Aframaxes. As our sustainability journey progresses, the Group will continue implementing decarbonisation initiatives and seeking strategic collaborations with industry partners to further reduce emissions. What Is the Outlook? The shipping industry is set to face significant regulatory changes in 2025 as new environmental measures come into effect. The IMO is expected to introduce stricter regulations aimed at accelerating the reduction of GHG emissions from ships. These measures will focus on promoting alternative fuels, improving energy efficiency and potentially, implementing a global carbon pricing mechanism to drive decarbonisation. For more information on MISC 2030 Ambition, please refer to page 72. For information on our decarbonisation journey, please refer to our Sustainability Report 2024. Key Capitals: Material Matters: Risks: Energy Transition and Decarbonisation Risk Compliance and Regulatory Risk Asset Integrity and Performance Risk Project Delivery Risk Physical P Financial F Human H Natural N Climate Change Energy Management Talent Development and Retention Sustainable Supply Chain Financial Performance
RkJQdWJsaXNoZXIy NDgzMzc=