Charting shipping’s green transition with MOL’s Takeshi Hashimoto

Yeah, Julian, thank you very much. I appreciate your words. Yes, it's quite a special time for us. For quite many years, we recognized that the world is rapidly changing, and there was a kind of frustrated feeling among our organization that we were a little bit behind compared to the speed of global change. Perhaps not very much in the shipping industry, but if you look at other industries, the world is changing very, very rapidly, and more and more the shipping industry like us is facing difficulty attracting good talented people to come and join us to work together. That kind of situation was frustrating. Due to the fantastic financial results in the past two or three years, our balance sheet dramatically improved. There are so many things we really wanted to do, but in the past it was difficult because of resource issues: financial, human, and technical. But nowadays, we feel now is the time to tackle those things, and if we want, we can do it. Perhaps that is one of the rare opportunities in decades in our industry. So we decided to materialize as much as possible that MOL as of today.

Yeah, of course, we have to be careful about risk management. Every single investment comes with some kind of project risk and market risk, etc. However, that is normal for business. And perhaps nowadays, the people who participated in the panel this afternoon pointed out that there are so many different options and technical confusions, so it's a bit difficult for us to concentrate on what kind of area will be the good part of the investment. I agree. But because of that, I think it will provide us quite unique and interesting opportunities. If we have a clearer idea than our competitors, then we can establish our own position in the industry and enhance it and differentiate ourselves from others. Maybe we are not 100 percent correct, and perhaps we will make some mistakes. But if we try 10 times and get good results 7 or 8 out of 10, that is quite enough for me.

Yeah, that is quite a big challenge, to be honest. Traditionally, we are an operating company, and many of our people are quite good operators of the business. However, changing the portfolio, changing the organization, etc., is not our specialty. So, to tell you the truth, because of the relatively rich cash flow today, we do not hesitate to spend money on outside consulting services, advisory services, and many things. At the same time, we decided to change the basic attitude of the management team, including myself: traveling around, being part of forums and conferences like this, trying to exchange opinions, mingle with people, catch up with Europeans and Americans, and also understand what is really going on in emerging markets like India or South America. All these activities require human resources and budget, so I intentionally gave them the green light. Now is the time for us to invest. Of course, this will not continue forever, but for the coming two or three years, it will be a really critical time. So it's a moment of opportunity for you.

Yeah, the two or three ideas. The starting point is that, rather negative or crisis control type idea. One is that obviously the environmental issues: we really need to reduce our emissions. The Japanese government committed to reach net zero by 2050, and we as a company, MOL, also committed to reach net zero by 2050 without knowing the detail of how to do it. But we really need to realize it, otherwise it will be just propaganda. So we need to set up a realistic, achievable time schedule for how to achieve net zero by 2050, and what to do in the 2020s, 2030s, 2040s. That is definitely one of the very important drives for us to transform our organization. Another one is the structural change of the global economy. From day one of MOL's history, about 140 years ago, we were established in Osaka, and our main duty was to provide good service to Japanese industries for import and export. So always the Japanese customers first was our motto for the majority of our history. However, obviously globalization means even Japanese industries are moving out to many areas outside Japan, and they also developed their own business outside. Toyota is a quite typical example. So we also need to internationalize the organization and people's mindset, and perhaps the portfolio of human resources will be necessary. So these environmental issues and globalization together mean I recognize that we definitely need to transform our industry, otherwise it is very difficult to be sustainable in this industry.

Yeah, the difficult part is especially our shareholders need quite solid return every quarter, so I must explain to them that if we just concentrate on the profit of this quarter or next quarter, the best way is to continue constructing standard type vessels perhaps with scrubbers. However, we will have a serious situation after three years, after five years, or perhaps after ten years. We don't know, but we cannot continue constructing standard type vessels forever; it is very clear. COVID-19 gave us a good lesson. When it started, the old cars were punished, and all of a sudden the shipping market went down to the bottom, then quickly started recovery. The container market was typical: normally the average price of a container is $1,000-2,000, but it became $8,000-10,000. Still, our customers could manage to pay because the global supply chain shouldn't be stopped. So if necessary, my observation is that the global economy can afford to pay the additional cost. Of course it creates some pain. The $10,000 container market continued for more than a year, and I admit it created quite negative damage to various industrial sectors; I am so sorry about that. But the point is that still the global economy could manage to pay.

Yeah, before and after the Ukraine war, I feel some change in people's feelings. The reality, as Julian correctly pointed out, is that the global economy will continue to require natural gas. So it is ideal to reduce hydrocarbon consumption steadily. However, I think especially in the Asian market, we should concentrate on how to reduce coal consumption. Coal is a very important energy source in the Asian market, not only for power production but also for steel, iron and steel, and cement industries; many industries are using huge volumes of coal and producing huge volumes of CO2 emissions. So LNG can be a quite good alternative to coal. That is why we expect the potential of the Asian energy market will be bigger than the rest of the world. In addition, the Russia-Ukraine situation added some political tension, and the world cannot continue to rely on Russian pipeline gas, which means even Europe will need to import LNG, at least for the time being, from the Middle East or North America. So my analysis is that we definitely need quite a big volume of LNG for the coming 20 or perhaps 30 years. It depends on various factors, but of course there will probably be new fuel markets growing in terms of CO2, hydrogen, ammonia. These are all markets that I'm sure you will be eager to be shipping. Yes, yes, yes. So as a business person, I do not want to miss the opportunities. We are also focusing on CCS, CCUS type technologies and carbon transportation; that will be quite unique and, if it flies, a very important sector.

Yeah, it's based on the assumption that if we can continue to use fuel oil and the price of oil is relatively low, there is no point in doing the big hustle to develop and materialize wind power. However, nowadays, our goals have changed: number one, we need to reduce emissions; number two, the cost of fuel became quite expensive compared to 10 or 20 years ago. So the combination gives rise to the idea to use wind. It's not a new idea; it always existed in the market in the past, but people didn't pay much attention. In the case of the Wind Challenger project, we actually supported the development of the design and ideas for quite many years, paying a relatively small budget every year, but people did not believe very much. But nowadays, the situation has dramatically changed, and as my colleague mentioned, we should do everything we can. So certainly, the Wind Challenger can reduce 5 to 8 percent of energy consumption, so it is now economically viable. But five years ago, it was a good idea but not economically viable.

Well, at some point in time, everybody should decide their own position. Perhaps nowadays, quite many people want to continue the wait-and-see attitude; it is understandable because it is not very clear what the global trend is, and people do not want to choose the wrong option. However, within 5 to 10 years, definitely, people need to decide their own position on what to do if they want to continue in the shipping industry. The answer should be different based on the sector, area, or country. So we need to carefully think about our own strategy and focus area. The decision-making process cannot be avoided, and it shouldn't be too early, but definitely shouldn't be too late.