Maersk CEO: We will need 5-15% more capacity to meet IMO 2023

Moscow Maersk
Moscow Maersk; Source: A.P.Moller Maersk

Meeting the IMO 2023 regulations will have quite a significant impact on the supply of vessels in the container shipping market in the long term, Søren Skou, CEO of A.P. Møller – Mærsk A/S, estimates.

Moscow Maersk; Source: A.P.Moller Maersk

As of 2023, the shipping industry will need to meet a new round of vessel efficiency and carbon intensity regulations applying to existing ships. In practice, this means that ships would have to meet a specific Energy Efficiency Existing Ship Index (EEXI), have an enhanced Ship Energy Efficiency Management Plan (SEEMP) that lays out the vessel’s energy efficiency improvement steps, and determine Carbon Intensity Indicator (CII) rating scheme.

The regulations aim to cut the carbon intensity of all ships by 40% by 2030 when compared to 2008 levels.

“This is relatively new legislation and we are still trying to figure out what the impact will be on the supply. There are different ways of improving the energy ratings of old ships: you can use biofuel or slow down the speed. These are the two most obvious ways of moving the energy rating from a D to a C,” Skou explained, speaking on the likely impact of the regulations on the market.

“At this point, we only have some high-level numbers for our own fleet. It looks like in order to comply we will need somewhere between 5 and 15 percent more capacity up towards 2030 if the way we comply is by lowering the speed.”

This is quite a significant impact if compliance is based on slowing down the speed, which is the most likely option given the shortage of biofuels, and their price. Of course, this is still outstanding.”

Commenting on the regulation during a conference call on the company’s business performance for the second quarter of 2022, Skou said that the manner of the enforcement, as well as its timelines, remains unclear at this point.

What we understand is that it would really start being enforced in 2024 and 2025. Therefore, the short-term impact may be very limited, but in the longer term, it will be quite significant,” he noted.

Maersk delivered record results in Q2 2022, as revenue increased by 52pct. and earnings more than doubled compared to same quarter last year. Results were driven by continued exceptional market conditions and sustained momentum from the strategic transformation focused on integrated logistics. Based on the strong performance in the first half of 2022, Maersk has upgraded its guidance for the full year 2022 and increased the current share buyback programme.

In Q2, revenue grew to $ 21.7bn, EBITDA and EBIT increased to $ 10.3bn and $ 9bn respectively, and free cash flow rose to $ 6.8bn. The Q2 net result came in at $8.6bn and $ 15.4bn for the first half of the year. Return on invested capital (ROIC) was at 62.5 pct. for the past 12 months.