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. Quite many years we recognize that the world is rapidly changing, and it's kind of a bit of a frustrated feeling among our organization that we are a little bit behind compared to the speed of global change perhaps not very much in the shipping industry, however, if you look at other industries, the world is changing very, very rapidly, and more and more the shipping industry like us are facing the difficulty to attract good talented people to come and join us to work together. So that kind of situation is a bit frustrated. And due to the quite fantastic financial results in the past two or three years, our balance sheet dramatically improved, and there are so many things we really wanted to do, but in the past it was a bit difficult because of resource issues: financial resource, human resource, and technical resources. But not nowadays. We feel that now it's a time to tackle those things, and if we want, we can do it. Perhaps it's one of the rare opportunities in decades in our industry. So we decided to materialize as much as possible that is M.O.L. as of today.

Yeah, of course we have to be careful about risk management. Every single investment will come together with some kind of project risks and market risks, etc. However, that is normal thing for business. 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 time for us to concentrate on what kind of area will be the good part of investment. I agree. But because of that, I think it will provide us with quite unique and interesting opportunities. If we have a clearer idea than our competitors, then we can establish our own position in the industry, enhance it, and differentiate ourselves from others. Maybe we are not 100% correct, so perhaps we will have some mistakes. But if we try 10 times and get good results seven or eight out of ten, it's to me quite enough.

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 therefore, to tell you the truth, because of the relatively rich cash flow today, we do not hesitate to spend money for the service provided by outside consulting services and advisory services, so 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, try to exchange opinion, mingle with people, catch up with the Europeans and Americans, and also understand what is really going on in emerging markets like India or South America. So all these activities require human resource and budget. So I intentionally give 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, we will be really critical time. So it's a moment of opportunity for you, yeah.

Yeah, the two or three ideas – starting point is rather negative, or how can I say, crisis control type idea. One is 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, M.O.L., 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 therefore we need to set up a realistic, achievable time schedule of how to achieve net zero by 2050 and what to do in the 2020s, 2030s, and 2040s, etc. 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 M.O.L.'s history about 140 years ago, we established in Osaka, and our main duty or main obligation is to provide good service to Japanese industries for import and export. So always Japanese customers first. That was our motto for the majority of our history. However, obviously globalization is that even Japanese industries are moving out to many areas outside of Japan, and they also developed their own business outside. Toyota is a quite typical example. So we also need to internationalize. It's quite difficult – the organization, the people's mindset, and perhaps the portfolio of human resources will be necessary. So these environmental issues and the globalization together, I recognize that we definitely need to transform our industry, otherwise it's very difficult to be sustainable in this industry.

Yeah, so that's a bit difficult part. Especially our investors, our shareholders need quite solid return every quarter. So I must explain to them that, okay, if we just concentrate on the profit of this quarter or next quarter, the best way is to continue to construct standard type vessels perhaps with a scrubber. However, we will have a serious situation after 3 years, after 5 years, or perhaps after 10 years. We don't know. But we cannot continue to construct the standard type vessels forever, it is very clear. So COVID-19 gave us quite a good lesson. When it started, the old car was 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 to $2,000, but it became $8,000 to $10,000. Still our customers could manage to pay because the global supply chain shouldn't be stopped. So my observation is that if necessary, global economy can afford to pay the additional cost. Of course it creates some pain. The $10,000 container market continued more than one year, and I admit that it created quite negative damage to various industrial sectors. I'm so sorry about that. But the point is that the global economy could manage to pay.

Yeah, before and after the Ukraine war, I feel some change of people's feelings. The reality is, as you quite correctly pointed out, that definitely the global economy will continue to require natural gas. So of course it is ideal to reduce the hydrocarbon consumption steadily. However, I think that especially in the Asian market, we should concentrate on how to reduce coal consumption. Coal is quite an important energy source in the Asian market, not only for power production but also for the iron and steel industries, cement industries, and quite many industries are using a huge volume of coal and producing huge CO2 emissions. So LNG can be a quite good alternative to coal. It is the reason why we expect that the potentiality of the Asian energy market will be bigger than the rest of the world. And in addition to that, 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 a quite big volume of LNG for the coming 20 years or perhaps 30 years. We will see, it quite depends on the combination of 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. So we are also focusing on CCS, CCUS type technologies, and CO2 transportation will be quite unique and if it will fly, it's a very unique and important sector. If these CCS, CCUS technologies can be economically commercially viable, then it can reduce a lot of the burden of the people in the world.

Yeah, it's based on the assumption that if we can continue to use fuel oil and the price of oil is reasonably low, there's no point to do the big hustle to develop and materialize wind power. However, nowadays, our goal changed. Number one, we need to reduce emissions. Number two, the cost of fuel became quite expensive compared to 10, 20 years ago. So this combination is the idea. To use wind is not a new idea, it always existed in the market in the past. However, people didn't pay very big attention. So in 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 dramatically changed, and as my colleague mentioned, nowadays we should do everything what we can do. So certainly the Wind Challenger can reduce 5 to 8% of energy consumption, so it is now even economically viable. But 5 years ago, it was a good idea but not economically viable.

Well, at some point of time, everybody should decide their own position. So perhaps nowadays quite many people want to continue the kind of wait-and-see attitude. It is understandable because still it's not very clear the global trend and so people do not want to choose the wrong option. However, within 5 to 10 years time, definitely people need to decide your own position. What to do in the shipping industry if you will continue. The answer should be different based on the sector, area, countries, etc. So we need to carefully think about our own strategy and our own focus area. Then cannot avoid the decision-making process. And it shouldn't be too early, but definitely shouldn't be too late.