Wait and don’t take chances – containership owners and the maritime transition

TradeWinds Shipowners Forum 2022 – Summary

Hamburg, 07-09-2022 – “TradeWinds is the international must-read for the maritime sector, making it a perfect fit for SMM, the leading international maritime trade fair,” said Bernd Aufderheide, President and CEO of Hamburg Messe und Congress, welcoming the participants to the well-attended TradeWinds Shipowners Forum during SMM. The meeting traditionally focuses on shipowners and their investment decisions. TradeWinds Editor-in-chief Julian Bray, who praised SMM as a “melting pot for the industry”, opened the discussion by briefly describing the challenging business environment marked by climate change, the pandemic and wars, then turned to the President of the German shipowners association (VDR), Dr Gaby Bornheim. The latter, CEO of the shipowner Peter Döhle, underlined the importance of the shipping industry, which the general public has become more aware of in the wake of the pandemic and growing supply chain issues, she said. “Life is nothing without shipping,” Bornheim stressed. If the industry wants to be carbon-neutral by 2050, there is plenty of work ahead, but the goal is achievable and there is no alternative, she continued. It is of paramount importance for all stakeholders to cooperate, including suppliers, ports and fuel providers, Bornheim said: “We don’t make the fuels; we only have the ships.” The industry has to make every effort to be attractive for young talents – especially women, the CEO pointed out.


Session One – From good intentions to decisive action: Implement strategies, get results

Julian Bray asked the first panel a somewhat provocative question: Is the industry even ready for the maritime energy transition? “Consumers want it, financiers want it, and employees want it too.” Nevertheless the CO2 emissions from shipping will once again be higher in 2022 than in 2020, similar to the previous year. So it is time to move from intention to action, said Bray. Øistein H. Jensen, Chief Sustainability Officer at the ship-owning company Odfjell, took up the point, saying: “We are well-prepared.” Efforts to improve the energy efficiency of the fleet have been under way for a long time, and Odfjell had implemented more than 100 retrofitting programmes varying in scope, he pointed out. Dr Kurt Klemme,CEO of the shipowner NORD, referred to the relatively young average age of his fleet and the resulting high energy efficiency standard, stating: “We are doing whatever we can, but I am not sure we will achieve carbon-neutrality by 2050.” Meanwhile, new regulations such as the Carbon Intensity Index (CII) have a disciplining effect on owners, encouraging them to operate more efficiently. Scott Bergeron, Managing Director Global Engagement & Sustainability Commercial at Oldendorff, drew attention to the complexity of the CII and the fact that it may give rise to conflicting goals. He suggested to have it reviewed by the International Maritime Organization, IMO by 2026. What matters ultimately, he stressed, is the absolute emissions. Knut Ørbeck-Nilssen, CEO of DNV Maritime, underlined the importance of IMO as the international regulatory body for the maritime industry, despite all criticism. Fuel prices are bound to rise in any case, he said, leading to more stringent efficiency and performance requirements. Performance and efficiency could benefit significantly from wind-assisted propulsion, suggested Cristina Aleixendri,COO at Bound4Blue. After all, wind is free and can cut the consumption of expensive alternative fuels, she said. Wind is fuel, she added, not merely a means to conserve energy, and it yields a positive return on investment.

According to Bergeron, the market has refocused: While people used to ask when new regulations were passed: “How can we solve this problem?”, they now agree: “We want to become clean!” Jensen emphasized the importance of transparent data, which can be used to determine the Scope 3 emissions and thereby the CO2 footprint of a product. For manufacturers it is especially important to be able to provide this kind of transparency to investors, he said. Klemme agreed, pointing out, however, that what matters most to cargo owners is the price. Ørbeck-Nilssen stressed that the shipping industry cannot possibly tackle the decarbonisation challenge alone. The production of alternative fuels, and building up an appropriate infrastructure will take huge investments, he said. For now, the industry must gather as much practical experience as possible. Ensuring fuel flexibility is part of the strategy pursued by Odfjell, as well, said Jensen. Betting on a single fuel would be too risky. Oldendorff manager Bergeron recapitulated the example of LNG: Liquefied natural gas was considered as the fuel of the future 15 years ago; today it is subject to massive criticism. “Can the net-zero goal be achieved by 2050?” asked moderator Bray at the end of the first panel discussion. Klemme wasn’t the only panel member who expressed serious doubt. “We have an obligation to do our best,” said Jensen. Bergeron emphasized the strong culture of compliance among shipowners. However, what is lacking is the technology, she cautioned. DNV Maritime CEO Ørbeck-Nilssen found the right closing words: “We won’t achieve it by talking. What we need is action.”


Session Two – Can the boom in the container segment herald in a new, sustainable age of shipping?

The day’s second panel discussion addressed the question whether the positive development in the container segment can be a catalyst for the maritime energy transition. In his introduction, host Julian Bray described the excellent situation in the container segment which has led to substantial earnings for shipowners and a well-filled order book for yards. Is any of this money being invested in the maritime transition? he asked. Ulrich Paulsdorff, CEO of Atlantic Lloyd, reported that his company has six vessels equipped with ammonia-ready dual-fuel engines already. But it will take another five to ten years to get a clear picture, he opined. “The fuel must not only be available in Rotterdam but also at smaller ports.” Constantin Baack, CEO of MPC Container Ships, agreed: “We haven’t missed the train. We are just waiting and watching to make the right decisions.” During the second half of the year MPC expects delivery of several ships with methanol-ready dual-fuel engines, he said. “But the infrastructure isn’t there yet, and neither is the fuel.” There are enormous regional differences, according to Baack; in America, ships travel at high speeds and carry many refrigerated containers. He expects the transition to start on a manageable scale in the intraregional market. “More projects will come, but no-one will find a solution alone.” Alexandros Karydis (Director Chartering, Hanse Bereederung) considers the large liner companies as the “locomotives of the development”. Nobody can just push a button and get a ‘green’ ship, he said. In his opinion, LNG is a good temporary solution that gives the industry time to try out alternative approaches and make appropriate investments. His favourite fuel for the longer term is ammonia. Axel Siepmann, Global Head of Corporate Finance at BRAEMAR Corporate Finance, took a closer look at the financial aspects, pointing out that the industry’s balance sheets are sound. “The industry is in a comfortable situation and able to initiate innovations.” Liner companies should drive the development because they are best positioned for large-scale planning, he insisted. At the same time it is important to make sure investments perform well; no good opportunities have been missed to date, he said. Paulsdorff deplored that many technical retrofits fail to deliver the full benefits promised by the suppliers. And while slow steaming is helpful, customers frequently demand higher travelling speeds, he added.

Baack also mentioned the uncertainties resulting from the EU emission trading scheme: “Nobody can tell how this will impact on us.” Furthermore, the scheme raises many questions affecting the relationship between charterers and owners. Finance expert Siepmann pointed out that ESG factors are gaining in importance in the shipping sector: “There is more interest in qualified green investments than there are projects,” he said, adding that money for true innovations is available.  Current corrections seen in the market should not be overrated, said Karydis. Considering the combination of inflation, the Ukraine war and the decarbonisation trend, he said, it makes sense for charterers to wait and see. Baack agreed that the market can be expected to remain robust after cooling off slightly. Paulsdorff, on the other hand, was concerned that the geopolitical situation might endanger global free trade. While he welcomed the industry’s commitment to the net-zero goal for 2050, he doubted that it is achievable. Baack agreed that major obstacles stand in the way of reaching this goal. It is up to governments to create the right conditions, he insisted. Karydis likewise expressed some doubts about 2050 being a realistic goal but suggested that a new generation of decision-makers should take over who take a different approach to the matter: “We ourselves believe that recycling waste and placing our laptops in sleep mode is being sustainable.” Siepmann took a more positive outlook on the future: “We are here at a wonderful trade fair where this topic is at the centre of the discussion. Let us discover opportunities and be optimistic!”