“...weaker demand and lower shipping prices are having a major impact”

In the course of the COVID-19 pandemic, the transport industry found itself in turbulent waters: delays in processing, massively overbooked ships, problems with the return of empty containers and obstructions to the transfer of goods in ports. And on top of all that, there was the accident in the Suez Canal. The situation had hardly eased up when the economy clouded over again due to the Russian attack on Ukraine. How can we prepare for such crises? Is it possible to have an emergency plan in the drawer for every scenario?

Preparing for such crises is not easy since they can have a direct and multifaceted impact on our business. This makes it important for us to continuously identify potential bottlenecks and weak points – which can be extremely difficult in our volatile industry. Pandemics and accidents on important transportation routes cannot be foreseen, but we still try to adapt our processes to make them more resistant to sudden disruptions. 

On the topic of COVID-19: Despite the pandemic and the associated challenges, HLAG was able to achieve exceptionally good numbers. Can you risk a forecast for 2023?

The weaker demand and lower shipping prices are having a major impact on our earnings. We only recently published our results for the first half of the year, and they are significantly below those from the previous year. However, we were able to confirm our overall profit forecast for 2023. It is important here to always keep in mind the current risk factors that could negatively impact the forecast – such as the war in Ukraine, continued inflationary pressure and high inventory levels.

Have you noticed an increase in Chinese production capacities recently? Or has there been a contrary shift in production away from Asia – so-called “near-shoring”?

China is a key factor in global production and invests continuously. At the same time, however, the topic of “near-shoring” has been gaining in importance. Companies are increasingly rethinking their production sites and evaluating whether they can shift their manufacturing closer to the target markets, which can offer advantages, such as a better ability to respond to changes in the market as well as shorter delivery times. In the end, however, I think that China will remain a central actor due to its long industry experience and established supply chains. 

In 1981, HLAG put into service the largest container ship in the world at the time, the “Frankfurt Express”, able to transport 3,045 TEU. The current “Frankfurt Express” now easily holds over twice that. In the meantime, your company also has numerous ultra-large container vessels (ULCVs) and a “flagship” that carries 24,000 TEU. How do you view this development, and is it time – considering these numbers – to start thinking about a new name for this type of ship?

Even despite infrastructural limitations, it would be possible to build ships with more capacity without them having to be significantly larger. However, the economic advantages, or “scaling effects” diminish with increasing size. Space optimization, such as in the cargo holds, tanks and machines rooms, might make it possible to add a few additional container spaces. But I don’t think we will see ships with much more capacity in the foreseeable future that would merit a new ship type designation.

Around the world, the order books of the shipyards are full and new ocean giants are continuously being launched. Does it look like we are seeing a repetition of the overdevelopment of capacity witnessed 15 years ago, which brought too much “movement” onto the market at the time?

At first glance, the situation does seem reminiscent of the overcapacities from about 15 years ago. Back then, the rise in the number of ship orders led to an imbalance between supply and demand. However, the order books are not quite so full today as they were then, and the global fleet is on average older, which means there is also an increased number of ships being scrapped. Furthermore, it is important to note that the current ship orders can also be attributed to modern developments such as more sustainable ship designs and stricter environmental regulations (e.g., CII).

During our last interview in 2019, you mentioned the launch of “Quick Quotes.” How has that tool fared since its introduction? What benefits of increasing digitalization has Hapag-Lloyd taken advantage of and implemented since?

We are very satisfied. Since the introduction, the amount of cargo booked via Quick Quotes has seen strong growth. Today, an impressive portion of our total volume comes through Quick Quotes. We made further improvements at the end of 2021, and another digital tool was also added later in the form of “Quick Quotes Spot,” which allows customers to receive a fixed rate in real-time and make a direct booking. Alongside a number of other digital products that simplify processes for our customers, we have made great progress on the digitalization of our container fleet with “Hapag-Lloyd LIVE.” Today, over 500,000 of our standard containers and over 80 percent of our refrigerated containers are equipped with modern trackers. This means that our customers can locate their container and also receive additional information, such as the temperature or humidity inside the container.

HLAG holds shares in the container terminal Altenwerder in Hamburg, in Jade Weser Port in Wilhelmshaven, in Tanger Med on the Mediterranean and in a newly built Eurogate terminal in Damietta, Egypt. Might the next “logical step,” geographically speaking, lie in the direction of Asia or the Americas?

We have already taken that step. We invested in J M Baxi Ports & Logistics Limited – a leading terminal and inland transport service provider in India. This will provide us with even better access to this strategically important growth market. In addition to container terminals, the company also operates inland container depots and offers rail-based services. And we are active on the American continent as well: Just recently, we successfully completed the takeover of the terminal business of SM SAAM. This operation encompasses ten terminals in Latin America and the USA.

Within the framework of IMO2020, the international shipping industry had to respond to intensified environmental rules from the International Maritime Organization. Plus, an increasing number of companies are actively asking for more “environmentally friendly” transport options. What efforts has HLAG undertaken in this regard in the meantime? Has the pilot project of a large ship with LNG drive proven itself, and can ocean freight ever truly become “really green”?

At the time, we were the first shipping company to convert a ship with a conventional drive to liquified natural gas (LNG). It was a meaningful step from the perspective of sustainability. But it isn’t economical. Such a complex conversion is simply too expensive. 

Overall, decarbonization is firmly anchored in our strategy. By the year 2045, we want to make the operation of our fleet climate-neutral. We are relying on alternative fuels to achieve this, such as biofuels. Our customers can already profit from this today by means of our “Ship Green” transport solution. We have also ordered twelve large container ships with dual fuel engines, which are operated with LNG but can also make use of alternative synthetic fuels over the longer term. With LNG alone, we won’t achieve our long-term goals, but it is an important transitional fuel that allows us to reduce CO2 emissions by up to 25% and lower sulfur dioxide and particle emissions by over 90%. We are also upgrading our existing fleet to make it more efficient and environmentally friendly, and we will be refurbishing roughly 150 ships in the coming years.

I am convinced that climate-neutral shipping is possible. However, we need the right conditions to accomplish this, especially when it comes to the availability of future alternative fuels. Investments in research and additional infrastructure are still required before these are ready for maritime shipping. 

cargo-partner has been active in ocean freight now for 40 years and considers Hapag Lloyd to be a “core carrier” capable of providing the full range of services. In your view, what distinguishes working with a mid-sized freight forwarder like us from working with one of the industry’s so-called “big players”?

There are definite advantages to cooperating with an experienced and established partner like cargo-partner. While “big players” have extensive resources and global reach, working with a mid-sized freight forwarder offers a more personal and flexible approach. That can be an advantage, especially in our volatile and dynamic industry, where it is important to be able to react quickly and efficiently. For this, such an approach is quite valuable.

Next year you will celebrate 10 years as CEO of Hapag Lloyd – What surprised you most during these ten years? What goals would you aim for “at the helm” for the next ten years?

How quickly the time has gone. Other than that, what has impressed me most is how flexibly our team has adapted to the continuous changes in our industry, especially when I consider the ups and downs over the last three years. What will happen in ten years is hard to say. The fact is that we want to continue growing. That means more global partnerships, more sustainable solutions and more innovative and digital offerings for our customers. 

You are a big ice hockey fan, and in our last conversation five years ago you picked the Nashville Predators to win the Stanley Cup. (The Capitals ended up taking that one.) Which NHL teams do you think have a chance at winning the title this season?

The NHL is full of talented teams, but the New Jersey Devils are a strong candidate. Of course, the path to the Stanley Cup is always unpredictable, but consistent performance and a young team give them a good shot at the title.

As long as we are talking about sports: Feyenoord, Excelsior or Sparta?

Feyenoord.