Hapag-Lloyd CEO: We are definitely looking into methanol and ammonia

German container shipping company Hapag-Lloyd is considering investments in methanol and ammonia-ready newbuilds, alongside exploring wind propulsion options, as part of its sustainability agenda.

Speaking today in a live session, Hapag-Lloyd CEO Rolf Habben Jansen expressed openness to alternative fuels, stating that while LNG has been a significant focus for the company, Hapag-Lloyd is actively looking into the potential of methanol and ammonia. With an eye on the future, Hapag-Lloyd believes that multiple fuel options will play a role in decarbonizing the industry.

“I don’t think it has been decided yet what solution will win. I believe there will be multiple fuels out there in the long run. In that context, we are definitely looking at methanol and ammonia, as well as wind-assisted propulsion for example,” Jensen said.

Hapag-Lloyd’s head shared previously that if the company moves forward with a decision to order new ships, it would most probably be in the smaller vessel classes featuring alternative propulsion.

The container shipping industry has embraced methanol as one of its favorite solutions for decarbonizing its fleet. Methanol-powered vessels offer several advantages, including improved air quality, lower particulate matter emissions, and reduced sulfur and nitrogen oxide emissions. Moreover, the existing infrastructure for methanol production and distribution, along with its compatibility with existing ship engines, make it a practical choice for retrofitting existing vessels.

In addition to the adoption of methanol, the container shipping industry is also witnessing deliveries of ammonia-ready containerships. Ammonia, another promising fuel option, has gained attention for its potential as a zero-emission fuel with high energy density. Ammonia-ready containerships are designed to accommodate the future use of ammonia as a fuel, offering flexibility and readiness for the transition to this alternative energy source.

The industry’s first ammonia-ready containership CMA CGM Masai Mara was delivered a couple of weeks ago.

For the time being, Hapag-Lloyd is sticking to biofuels. The liner major has just launched its Ship Green solution enabling customers to transport their cargo on biofuel blends to cut emissions. The product offers three different options, representing different levels of CO2e emission reduction for the ocean leg of the shipment: 100%, 50% or 25%.

Biofuel is an important part of Hapag-Lloyd’s sustainability journey as biofuel blends can give a meaningful contribution to decarbonization as a drop in fuel. The ‘drop in’ quality of the solution means that little or no modifications are needed to the existing vessel’s infrastructure to switch to biofuel.

In 2022, the company used more than 120,000 tons of biofuel on more or less all of its ships.

So far, the uptake of the Ship Green product has been ‘okayish’, however, Jensen hopes there is still room for improvement in that respect.

“We have certainly taken a leap of faith but taking on quite a lot of biofuel, and that means that we can offer quite a fair number of ports that can ‘transport green’. Hopefully, we can be sold out on that fairly quickly,” he said.

Commenting on the sustainability agenda, Jensen noted that the company has been working hard on fleet renewal as well as phasing out of older, less fuel-efficient vessels. In addition, the German shipowner has launched its fleet upgrade program covering 150+ ships that will be retrofitted with new propellers and bulbous bows.

“Sustainability will remain at the heart of everything that we are doing and alternative fuels play an important role in this, even if the availability of those fuels over the upcoming years is still not a given,” he pointed out.

Looking ahead, Hapag-Lloyd is in the process of defining its strategy for 2030, emphasizing the importance of remaining innovative and adaptable in the face of changing industry dynamics.

Asked whether the IMO 2023 might result in another wave of consolidation for midsize and small ship owners and carriers amid their inability to undertake the necessary investment to comply with the CII mandates, Jensen believes that this will not occur as the market is already fairly consolidated, and further consolidation could raise concerns for regulators. As explained, investments have primarily been focused on larger ship sizes in recent years. Therefore, more investments are expected in newer, small, and mid-sized ships, which are ideal for implementing new and alternative propulsion technologies.

Jensen reiterated the company’s position on the implementation of a carbon tax in the shipping industry stressing that as a marketplace measure, it would help accelerate decarbonization.

Regarding the company’s investments in foldable containers, there have been tests conducted, but unfortunately, they were not successful, Jensen noted.

As for digitalization efforts, Hapag-Lloyd aims to continue its ambitious digital targets, with the share of online channels expected to remain stable. The company also plans to tap into the potential of AI and find the best use of this type of technology in its business operations.

The German liner major is also considering sharing container tracking data through API but expects this service to be available by the end of the year.

Jensen added that the container shipping market has experienced a normalization as demand has been subdued and congestion has started to ease. This has led to an increase in available capacity and a significant decline in freight rates. Some spot rates have even approached pre-pandemic levels. However, costs remain elevated. Regarding freight rates, while there has been a significant decline recently, it is anticipated that they will rebound in the third quarter of 2023.