Photo: Image courtesy: Maersk

Maersk CEO: LNG won’t play a big role for us as a transition fuel

The world’s largest container shipping company Maersk is likely to opt for a zero-emission alternative to fossil fuels rather than choosing LNG as a bridging fuel for the company’s fleet.

“We don’t believe that LNG will play a big role for us as a transition fuel, because it is still a fossil fuel and we would rather go from what we do today straight to a neutral type of fuel. However, that will be years into the future I suspect,” Søren Skou, Chief Executive Officer of A.P. Møller – Mærsk A/S said during the company’s Q3 2020 Investor and Analyst presentation held on Wednesday.

Maersk containers
Image courtesy: Maersk

LNG has been identified by industry majors, including DNV GL, as the likely transition fuel for the shipping sector due to major breakthroughs made over the past few years in the development of the necessary bunkering infrastructure.

French container shipping major CMA CGM has invested heavily in powering its new generation of ultra-large containerships by LNG.

By 2022, the shipping company plans to have a fleet of 26 LNG-powered vessels in service including nine 23,000-TEU ships, eleven 15,000-TEU ships, and six 14,000-TEU ships.

German liner Hapag-Lloyd is also exploring the viability of this option having launched the retrofit of its LNG-ready containership Sajir at the Chinese shipyard Huarun Dadong Dockyard Co earlier this year.

The boxship is the first of the 17 vessels in Hapag-Lloyd’s fleet that were originally designed to be LNG-ready.

Hapag-Lloyd hopes to learn from the project, paving the way for large ships to be retrofitted to LNG. However, its long-term goal is to have CO2-neutral shipping operations using synthetic natural gas. 

There are several promising solutions in the spotlight of the shipping sector’s debate on the potential fuels of the future, including ammonia, hydrogen, and batteries to power global fleets. However, the production and scale of availability of these fuels are yet to be ramped up in order to become viable alternatives.

Skou said the company was working hard on figuring out what the future fuel should be before it starts ordering any new ships.

“In terms of vessel types, we are very much aware of the risk of ordering ships at this point,” he added.

“We are not planning to order any new ship any time soon, because we still haven’t made up our mind on the potential fuels of the future. We would ideally like to figure out (…) and then start building ships that would fit that type of fuel when we need them. “

The container shipping heavyweight announced at the end of 2018 that it wants to become a carbon-neutral company by 2050.

In order to achieve this goal, the industry needs to develop carbon-neutral vessels by 2030, which means carbon-neutral fuels and the relevant supply chains need to be scaled up substantially over the next decade.

Ordering assets with an expected life span of 20-25 years is a very risky endeavor as technologies available today cannot meet the decarbonization goals of 2050 and could end up being a stranded investment.

Hence, the company is pulling up a significant investment in research and development to improve the technical and financial viability of decarbonised solutions. 

In line with those efforts, in June this year, Maersk teamed up with ABS, Cargill, MAN Energy Solutions, Mitsubishi Heavy Industries, NYK Lines and Siemens Energy in setting up the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping.

The center’s focus will be the development of new fuel types and technologies with the aim of achieving the IMO 2050 target and eventually fully decarbonize operations. 

Q3 2020 results

Danish container shipping major has managed to grow earnings and cash flow in the third quarter of this year, despite the negative effect of the COVID-19 pandemic on global economies.

The performance was driven by agile capacity management, cost-cutting measures as well as lower bunker prices and higher freight rates, Maersk said.

As a result of strong performance, Maersk upgraded its full-year guidance for 2020 EBITDA to be in the range of $8-8.5 billion and announced a new share buy-back programme of DKK 10 billion.

Commenting on the steps forward, Skou ruled out any acquisitions in the ocean space, saying the company achieved its desired scale with the acquisition of Hamburg Süd in 2017.

COVID-19 Vaccine

At the end of October, Maersk announced a partnership with COVAXX, a U.S. company developing a multitope synthetic peptide-based vaccine to fight COVID-19.

The duo signed an agreement that lays out a framework for all transportation and supply chain services that will be needed to deliver COVAXX’s vaccine candidate UB-612 around the world, once approved by regulatory authorities.

The financial terms of the agreement were not disclosed.

“We expect to be involved in the vaccine transport and we already have one contract for the transportation of a billion doses of vaccine. We think we should be involved in order to do everything we possibly can to help distribute the vaccine in the most cost-efficient manner. I don’t think it would be a huge business for us in that sense or impact much our financials, but we want to do whatever we can to help,” Skou pointed out.

COVAXX is currently conducting Phase 1 clinical trials of UB-612 in Taiwan and has an agreement with the University of Nebraska Medical Center to conduct Phase 2 trials in the United States, upon regulatory approval.

The company has advanced pre-commitments for over 100 million doses of UB-612 around the globe.

Maersk will be in charge of overseeing all logistics activities to ensure efficient transportation to developing countries.

The agreement provides for end-to-end supply chain management, packing and shipping, via air or ocean, ground transportation, warehouse storage and distribution to facilities to support COVAXX’s requirements for a pharmaceutical grade, temperature-controlled supply chain.

COVAXX is planning to manufacture 100 million doses of UB-612 during early 2021, and a billion doses by the end of 2021.

Related news

List of related news articles