Good morning, Jan, and welcome to Commodity Conversations. Could you please tell me a little about yourself and your role within Cargill?
I joined Cargill in the Netherlands as a trainee. After three years in grain, I worked in shipping for eight years and then went into the energy markets for six years. I returned to shipping about six years ago. I’ve spent most of my career on the non-agricultural side of Cargill, which is quite unusual.
I am currently the president of Cargill’s Ocean Transportation business. We charter around seven hundred ships: 25 per cent for Cargill and 75 per cent for external customers, operating mainly in dry bulk and, to a lesser extent, in wet bulk. We are one of the top charterers in the dry bulk sector.
Our business doesn’t handle container shipments – another department within Cargill handles them. The container business is relatively fragmented, but there is some overlap with dry bulk.
How many people work in Cargill’s Ocean Transportation Department?
We have around 300 people: 100 in Geneva, 100 in Varna, Bulgaria, where we do our operations, and about 50 in Singapore. We have smaller offices in the US and Asia, and Amsterdam.
It must be challenging to manage seven hundred ships. To what extent do you use Artificial Intelligence?
We have developed AI-assisted analysis to predict where ships will go once loaded. And we have some systematic trading where our models look at the data to produce a trade recommendation.
We use these tools on the operational side. We can see each ship’s daily fuel consumption and advise the master of the best speed to sail. There’s a lot to be done around the optimisation of this. There are still instances where we speed up a ship only to find it stuck in a port line-up.
Connecting some of these data points from the whole supply chain, not just the shipping side, will be critical in the next step.
Do you integrate the various physical commodities – and their supply and demand (S&D) – into your shipping models?
In shipping, you touch on all the commodities and their S&Ds. To succeed in the sector, you need to understand the underlying commodity flows and have a broad view of what crops are doing. For example, a delayed harvest will have an impact on shipping.
There is a lot of noise, and you must distil it all down to find the essence of what is driving the market.
When I started in commodities, shipping was an old-fashioned male-dominated sector with alcohol-fuelled lunches. How has that changed?
When I started, the business was, to some extent, as you describe it. When you walked into the room, everybody looked similar. Things have changed for the better. If you step on our trading floor here, you’ll see we have a diverse group of people in terms of gender, nationality, and skillset. It’s much more a reflection of what society is today.
There are three reasons for this change.
First, shipping has become more dynamic. In the early 2000s, when Cargill began growing its freight presence, many commodity markets were being deregulated, notably coal and iron ore. Previously, those markets traded on ten-year contracts. Then, in 2008-9, we had a massive spike in freight rates, spotlighting shipping as a significant input cost. It has attracted a lot of new talent to the industry.
Second, there has been a drive for more sustainable shipping, an essential topic for the younger generation. It has helped us attract bright and diverse people into the industry.
Third, there has been greater use of digital tools. In the old days, you had to use a particular broker because he was the only one who knew where ships were. It meant you had to have a good relationship with the broker. Now, you look at a screen and count the vessels yourself. It has made the industry more professional.
You started in grain, moved to energy and are now in shipping. Which do you prefer?
I like shipping because it touches on the underlying commodities and the energy landscape. Energy accounts for around 40 per cent of the cost of moving goods from A to B. I like the challenge of decarbonisation. Transiting to new fuels will have a massive impact on the sector.
Combining all these inputs and how they will play out drives me.
The United Nations predicts that global maritime trade tonnage will double by 2050. If true, it will make decarbonisation even more challenging.
There’s some uncertainty around the doubling, but it’s fair to say that as the population grows, trade volumes will increase.
We’re not going to achieve our GHG goals by doing things more efficiently. To achieve our goals, we must shift to zero-carbon fuels. We’ll run into a wall if we only work on fuel efficiency.
Recently, we have ended the ‘chicken and egg’ debate by ordering two methanol dual-fuelled bulk carrier vessels in collaboration with Mitsui & Co., Ltd. and TSUNEISHI GROUP. I believe shipping will need to move to zero-carbon fuels to meet its decarbonisation goals. Methanol offers one such pathway. It is the most technologically ready of the zero-carbon options, and we wanted to do something now to move the industry forward.
What about wind – cargo carriers with sails?
Wind power will not get us to zero carbon, but it is a step towards zero. Sails could reduce emissions by up to 20 to 30 per cent. They could also reduce fuel consumption by 20 to 30 per cent, giving us an immediate return on investment. Wind will make the hydrogen, ammonia, or methanol problem 20 to 30 per cent smaller.
We have been on the wind journey for some time. More than ten years ago, we experimented with kites. We learned that they didn’t work. Culturally, it was difficult for us to admit they didn’t work, but that’s okay because we learned from it.
On the waters today, you see ships with wind rotors – pillars that help power the vessel. We are looking at fixed-wing sails, something entirely new for our segment. They are huge, 40 meters sails made of carbon. The concept comes from professional yacht racing.
Do any bulk carriers currently have these carbon sails?
No, but we are going through the process of introducing the technology. There are several hoops we must jump through to get approval. You can imagine that the sails have an impact on visibility. There are always questions about stability and seaworthiness.
Currently, we are fitting wind sails to the Pyxis Ocean and should be able to start testing soon. There will be cargo onboard, so it will not be a sea trial but actual commercial use. We have done a lot of modelling, but we will see how it works when you have something on the water. We plan to scale it quite rapidly if we get confirmation that it works.
Energy-saving devices, biofuels, and supply chain optimisation are solutions that can be used today. We, as Cargill, are doubling down on all three of those.
I recently read Bill Gates’ book How to Avoid a Climate Disaster. He argued that we should first concentrate on the low-hanging fruit, such as electric vehicles, rather than the challenging areas of maritime freight and aviation.
I read the book and handed it out to our team in ocean transportation, as the book paints the picture very nicely.
Aviation, shipping, and steel were not part of the original Paris agreement on carbon reduction. I can see the logic that you shouldn’t prioritise those sectors, but they still represent a large part of emissions.
There is also the problem that all industries and sectors are trying to do the same thing – they all have the same deadline. Everybody wants to be zero by 2050. There will have to be some prioritisation because we’re all competing for the same solutions. Hydrogen, for example, pops up in a lot of industries. Bill Gates is correct in calling that out.
The maritime sector needs to contribute. We have a responsibility as an industry to get going and can’t just sit around and say we will look at the issue in 10-15 years.
There are two points I would like to make on this. First, there is the issue of who will pay for it. In this sense, aviation is probably better placed to absorb the cost than shipping. The second is that there are many industries within the maritime space. Cruise shipping differs from container shipping, which is different from bulk shipping. Which sectors are the biggest emitters, and which are closest to the end-user? It will be easier to pass on decarbonisation premiums in some parts of the supply chain.
The cost of decarbonisation in shipping will be huge, but in the container sector, it might mean only an extra half dollar on a pair of shoes. If you can pass the costs down to the end user, you can start scaling this and lower the cost of these new technologies. You can then roll them out to the broader industry.
There’s more to do between sectors, but we lack the mechanism. We tried to get one global carbon market in Glasgow but didn’t manage it.
What about the industry’s shift to low sulphur fuels – did that have an impact?
There is no debate; the shift has been beneficial from an environmental point of view. The move to low-sulphur fuels was a lot easier than people expected. There had been fears that half the fleet would get stuck, but if you announce things early enough, the industry finds a way of working around it.
Some people in the industry argue we should have gone straight to zero carbon, but it wasn’t feasible when the legislation was drawn up in 2016-17.
What are the other sustainability issues in shipping?
When people talk about sustainability in shipping, they only speak about decarbonisation. Sustainability is a much broader issue. It’s about human rights and labour conditions at sea. It’s about the recycling of ships. Look at the SDGs. They are a lot broader than just GHG emissions.
When researching this interview, I read that you once walked out of a conference panel because it consisted entirely of men.
We had been toying with this for a while and had decided that – to make a statement – we should represent ourselves in a diverse environment. You can’t say diversity is essential and keep doing things as you’ve always been. We had decided to only go on panels and accept speaking arrangements when there was a diverse group of people represented.
The conference you mentioned was in Norway. The organisers changed a little bit what they had promised. I decided to say that that was not what we agreed, and I didn’t show up on the panel. It was a small thing, but it’s gone a long way, and we have gotten a lot of credit for it.
Many event organisers now put gender parity as a minimum requirement. It is becoming an industry practice. It is great to see.
Are you seeing any move to gender diversity among crews?
The latest number I’ve seen is that females make up only 2-3 per cent of the workforce on ships. That’s far from gender parity, but it’s a complex issue. Ships’ facilities can be basic, and crews can be away from home for extended periods, which makes things more challenging.
Do modern ships need smaller crews?
No, a bulker needs about 20-25 crew. As we get more digital tools, that will probably reduce over time, but the work will also change.
It is a simple activity today but becomes a very different ball game once you start moving into ammonia and hydrogen fuels. We will need additional and higher skill sets than we have today.
When people think about shipping, they think of flags of convenience, tax avoidance, pollution, safety, and poor crew treatment. To what extent is that bad image justified – that’s the first question. And second, what is the sector doing to improve things?
You’re right that the sector has a track record of not being the most transparent and maybe not being the most proactive. You have good and bad spots in any industry, but we must be careful not to paint a whole industry with one brush.
Things are changing rapidly, especially in transparency. When you get transparency, you gain clarity as to what needs improvement. An excellent example is taxation and beneficial ownership – who owns the ships. From a compliance point of view, we are in a completely different world than fifteen years ago.
Initiatives like Rightship have created transparency around safety. More needs to be done. Working at sea is dangerous, and we must make it safer.
Other initiatives around the sector’s environmental footprint have helped. The drive to decarbonisation combined with digitalisation sets us up for further change.
Could you briefly expand on some of the recent industry initiatives? What role do the three organisations, Rightship, the Sea Cargo Charter and the Global Maritime Forum, play?
Cargill has had an investment in Rightship for over fifteen years. The organisation began as a vetting agency, going aboard ships to evaluate safety standards. It has played a considerable role in raising safety standards.
Rightship has since evolved into a tech and data-driven company in the ESG space. Safety is still an important pillar, but the environment and crew welfare are also there. Its mission is zero harm. It looks to achieve that by creating transparency and raising standards. We are still heavily involved. We believe the right thing to do is increase overall industry standards – not just ours.
Recently, I was elected chair of the Global Maritime Forum, where the more progressive companies across the maritime space work together on various issues. We collaborate and set industry standards. We have a project we call the Getting to Zero Coalition. We bring people together to look at technology and the investments we need to reach our emission objectives.
The Sea Cargo Charter is another programme under the environmental umbrella of the Global Maritime Forum. It is an end-user initiative to have a standard way of assessing shipping’s carbon emissions. Previously, there was no common standard; everybody did it independently, and there was no benchmarking. We are a group now of 32 companies that uniformly measure emissions and compare them to the scientific targets for emissions reduction. It’s a transparent and standard way to evaluate how companies and the industry are doing compared to where we should be. We actively participate in the programme.
There are other significant initiatives as well. The Neptune Declaration was created to organise the industry around crew changes during the covid period. It was challenging to get crew on and off ships – and then get them home because there were hardly any flights.
Another initiative is starting soon around diversity and inclusion to leverage best practices from the industry.
What is the role of the International Maritime Organisation?
The IMO is a UN body that looks to regulate what happens on the high seas. It sets minimum safety standards, along with a host of other things. In the old days, the minimum standard was the standard, but most owners and charterers now go beyond that standard regarding the environment and labour conditions.
The IMO sets the baseline for global shipping. It is important because shipping is a worldwide business. The IMO involves many stakeholders and countries, making it challenging to move at the speed with which the industry is changing.
Does that mean that the private sector is driving change within the industry?
Although it may not be valid across the entire industry, I agree that the private sector is taking the lead. For example, many countries and companies have declared 2050 net-zero carbon goals, way beyond the IMO goal of cutting carbon emissions by 50 per cent by 2050. A large part of the industry is willing to go faster than the IMO.
Finally, what advice would you give to somebody who’s starting in shipping or thinking about going into shipping?
Shipping is under-recognised and under-appreciated. People often think of shipping as a service or logistics operation, but it’s much more than that. It is a market – and a volatile one. The Capesize market is possibly the second most volatile market after Natgas. There is much more going on in freight than people realise.
If you’re interested in the decarbonisation drive, there’s a lot you can do in shipping, even though the sector is viewed as hard to change. There are a lot of opportunities. Our recent hires are excited about the green side of shipping and the contribution they can make.
For people already in freight or just starting, I would say, “Be curious. Don’t zoom in too quickly on one market or one commodity. Keep your eyes open, see how the interactions work and identify the risks and the opportunities.”
I would also say, “Don’t pursue a career where you don’t have a passion. You can be okay, but you will never excel. Go where your passion is and be curious.”
Thank you, Jan, for your time and input.
© Commodity Conversations ® 2023