MOL’s Ikeda takes a ‘wait-and-see’ approach to blockchain
When it comes to blockchain, the president of Mitsui OSK Line (MOL) Junichiro Ikeda is quick to admit that he is on the fence about the benefits it could bring to shipping.
“People see ambiguous possibilities when it comes to blockchain. There is no clarity at this point,” he tells Fairplay. “At this stage we don’t know whether employing blockchain will have a positive or negative outcome. Yet if our customers desire to use this technology, we will have to do something about it.”
MOL, the largest of Japan’s shipowners, was among 14 Japanese organisations to participate in a trial of the technology between August 2017 and March 2018. Acknowledging that the pilot project was not just for shipping companies but also sought to look at improving procedures, transparency, and efficiency for the trading scheme as a whole, Ikeda says there were some benefits in data inputting and document sharing and production on the financing and marine-insurance sides. “For these areas I think blockchain could enjoy great potential,” he says.
When it comes to shipping, Ikeda is less convinced, as early reports seem to indicate no incremental improvement to efficiency beyond those the shipping industry already enjoys from the electronic data interchange systems it has been using for many years.
With a career in shipping spanning more than 38 years, two-thirds of which was spent in the container business, Ikeda likens blockchain to the supply chain management portals GT Nexus and INTTRA that were introduced about 20 years ago and were “big news at the time, but saw business continue as normal”.
Branding blockchain as a buzzword, Ikeda says it may not herald the substantial change that everyone thinks, although he is frank enough to admit that he finds questions on the topic are the most difficult ones to answer.
The business environment is changing, he tells Fairplay. “We have 134 years of history but when we look 100 years down the road, we will need to have changed ourselves.”
Developments in technology will be a key part of this and the diversified group has adjusted its business plan to accommodate this drive by increasing its investment in research and development, which had, until recently, been left to the shipbuilders.
“The shipping business is a growing business and MOL will continue to grow as a result,” Ikeda explains.
In the past two years, the group has embraced radical change in some business areas, most notably in dry bulk – where it solidified cargo contracts and culled excess fleet capacity – and containers.
For much of its history, containers were the cornerstone of its business, but the creation of the Ocean Network Express (ONE) has seen MOL, along with fellow Japanese owners NYK and “K” Line, merge their box operations.
Day-to-day operations were transferred to ONE, a brand new Singapore-headquartered company that started operations on 1 April, with MOL retaining a 31% stake in the new business, Ikeda explains.
“Integration of [our] container businesses was the right decision to make, but it was a tough decision to make, “ he says, pointing to the immense challenges prevalent in the sector earlier this decade when MOL and many others were struggling to turn themselves around.
“The business exposure remains the same and in order to secure a net profit for MOL, we need the container business to do well,” he tells Fairplay.
As a result of the container changes, liquefied natural gas (LNG) has become a dominant focus and it is an area where the group has a competitive edge, Ikeda says.
MOL operates a fleet of about 100 gas carriers, most of which are on long-term contracts, but he acknowledges that “generally speaking, the LNG market prefers short-term contracts”.
“A long-term contract is desirable but if the needs of a customer changes, we need to proactively support this. The cost of building LNG carriers is very expensive, so if we only went for a short-term contract that would pose a big risk to the business.
“Many of our LNG carriers are on long-term contracts, but once these contracts are over and we have accounted for the depreciation of the asset, we can offer these vessels for short-term contracts,” Ikeda says.
The group’s prowess in gas extends beyond LNG transportation. It is the first Asian player to have made a foray into floating storage and regasification units, and the group is active in exploring the potential of LNG bunkering, which is one way of complying with the upcoming global sulphur cap.
With the regulatory deadline mandating the use of low-sulphur fuel looming large on the horizon, MOL signed a long-term charter contract in February with Total Marine Fuels Global Solutions for a 18,600 m³ LNG bunker vessel, which will be delivered in 2020. The vessel will operate in northern Europe and will be the first ever ship capable of supplying large quantities of LNG in one single bunkering operation.
Using this vessel, Total intends to serve the emerging marine LNG market for the container ship segment, including those sailing on the Europe–Asia trade and, in particular, CMA CGM’s LNG-fuelled 22,000 teu newbuildings.
“Europe tends to lead when it comes to environmental initiatives,” Ikeda tells Fairplay, “so having our company be involved in LNG bunkering put us in a good position to develop these relationships”.
How does MOL intend to comply with these regulations? Using low-sulphur fuel is the first choice and scrubbers come in second, he says. Like many owners, concerns over the supply of low-sulphur fuel are a focus as “it’s hard to discern if there will be enough stocks because the refineries are so focused on their own strategies”.
With scrubbers, retrofitting is difficult, so these are most likely to be used for newbuildings and not existing tonnage, he explains. Ikeda confirms that MOL plans to install scrubbers on its recently ordered very large crude carriers but stresses that the group is prudent when it comes to embracing new technologies and ordering tonnage.
The group may enjoy a foothold in virtually every shipping sector, as well as being well known for its strong relationships with leading Japanese utilities and other cargo owners, but it is always cautious about adding to its fleet.
There are two essential criteria when it comes to ordering a new vessel, Ikeda says, “There has to be a long-term contract attached or a clear need for replacement.”