Skou bets on retrofits with alternative fuels, rules out dramatic ordering

The world’s largest container shipping company Maersk is betting on a large-scale retrofit of its fleet with engines running on alternative fuels rather than planning a dramatic ordering spree to rejuvenate it and make its ships more eco-friendly.

During today’s full-year investors’ presentation, Søren Skou, CEO of A.P. Moller – Maersk, said the company was planning to replace some of its older fleet and keep its market share growing its Ocean business in line with the market growth.

However, he explained that there were no plans to rush to the yards for new ships, as some competitors seem to have been doing over the recent period, ordering ultra large containerships.

“We have to replace our tonnage, every day our older fleet gets older, and there will be some replacement work, but you should not expect anything dramatic,” Skou noted.

As explained, since last year the company started providing guidance on free cash flows in an attempt to get out of the constant discussion on ordering a lot of ships.

The company caused quite a stir earlier this year as it announced plans to start ordering first ships running on alternative fuels in three years.

The goal forms part of a bigger strategy as Maersk wants to become a net-zero company in 2050 setting a major precedent in the industry as it vowed to outperform targets set by the International Maritime Organization (IMO).

In order to meet its goal, the company needs to have zero-emission vessels in its fleet by 2030, which leaves it less than a decade to develop new marine fuel technologies and infrastructure.

Hence, the liner major has been investing a lot of its own money and effort to develop new fuels, zooming in on three potential fuel types based on alcohols (methanol and ethanol), bio-methane, and ammonia.

“In terms of Capex guidance and fuel technology, we are still working on figuring out what is the best fuel for us for the future. But, the alternatives that we are looking at are fuels like alcohols, ammonia and so on, which basically can be used on a combustion engine. So, that means that if we end up finding exactly the right solution there then would be a big retrofit opportunity for us,” Skou said.

“Of course, there are already marketed engines in the world that run on methanol, and ammonia engines are under development. I’m sure they will be more expensive than the ones we do today. However, it’s not like we’re seeing a huge mountain of Capex coming our way because of engine technology, especially if we end up where we think we will end up with ammonia or methanol as a future fuel.”

Since launching its transformation from a conglomerate into a logistics integrator, Maersk has put a major focus on digitalization of its services and acquiring logistics businesses and capabilities.

“We have been very successful with that, a couple of acquisitions that we had last year have been very helpful for us, and you should expect to see more of this type of acquisitions this year,” Skou added.

The company ended the year with record quarterly results, forecasting an underlying EBITDA for 2021 in the range of $8.5-10.5bn, compared to $8.3bn in 2020.