Executive Interview: Erik Hånell, President & CEO, Stena Bulk
(Article originally published in Mar/Apr 2022 edition.)
In a tough tanker market, Erik Hånell has Stena Bulk primed and ready for the anticipated rebound.
Can you give us a little background on how you got started in the maritime sector, your career progression and how you ended up in the “hot seat” as CEO of Stena Bulk?
Sure. I started at sea for 10 years at the beginning of the nineties, worked my way up to Senior Officer and then went ashore. I spent a short time at our headquarters in Gothenburg, Sweden, then crossed over to commercial operations with Stena Bulk. After various management positions for ten years in different ports including London and Houston, I went back to Gothenburg to become Vice President and then CEO of Stena Bulk in 2012.
Do you miss not being at sea?
I loved the work. It was a wonderful time in many aspects and it’s something I utilize all the time in my current role. But, of course, it has challenges socially. There were pros and cons, as in everything. However, it gave me a fantastic foundation and background.
I’m sure the people you serve appreciate your time at sea and operational experience.
I hope so, but maybe sometimes I know too much.
What is your general philosophy on fleet operations? Stena Bulk’s motto is “Oil should always travel first class.” What does that mean in practical terms?
It’s the Stena culture. Firstly, what our motto means is safety and that the oil is cared for to the highest degree. I’m sure most oil companies are saying that now, but it wasn’t a given 20-30 years ago. What that means for us today is our proactive development to make shipping safer, of course, and cleaner. And now with sustainability factors coming more and more into play, we want to be at the forefront.
A recent example is our newbuilds – with delivery a month away – of MR tankers that will run 100 percent on methanol. For all our newbuilds, we’ve taken a new step in the direction of efficiency and decarbonization. The Suezmax vessels of 2010 were our first generation of eco-ships. The innovative IMOIIMAX vessels, delivered between 2015 and 2018, were the next advance and at the time were ultra-efficient ships that have proven their worth and continue to do so.
But time goes by and the world is developing faster and faster, and now our new methanol-ready ships will be even more efficient and more green.
What is the size of your fleet, and what portion of it is owned versus managed?
We own about thirty percent of our fleet and then commercially manage the rest. Today, we have a total in the low-100s. Depending on market conditions, we’ve had between 100 and 120 ships over the last couple of years. As you know, we’ve had quite a tough market for some time now, so that is where we are now.
Do you mind discussing what your order book looks like, where they are built, and any hesitancy to order new ships because of future regulatory uncertainty?
Sure. As mentioned, we have our methanol-powered MR tankers about to be delivered a month from now. We’re building them together in a joint venture with Proman, the second-largest methanol producer in the world. They’re being built at Guangzhou Shipyard – the same yard that built our IMOIIMAX ships.
There are six ships in total, and we are a part-owner in three of them. Except for that, we do not have any more ships on order at the present time. The reason is that today’s environment has many question marks regarding future rules and regulations. We will not take a bet on the spot market when ships take two to three years to be delivered.
So, we are hesitant to move forward without knowing what fuels will be valid, along with newbuilding prices going higher and higher. And like many others, we’re now looking at the second-hand market.
Can you elaborate on Stena Bulk’s plans for decarbonization and carbon-neutral vessel operations?
This is a moving target based on the rules and regulations in the years to come. We have a net-zero goal by 2050. That is some time away, true, but that’s our ambition and I’m confident we’ll reach it. When this was decided several years back, the circumstances were far different than they are today. Even six months ago, what was valid may no longer be valid.
There’s been talk about ammonia, hydrogen, batteries and methanol. No one knows the answer, but we want to be curious in all sectors to see where it leads. The clearest picture for us is that of the methanol-powered ship. Since 2015, we’ve had lots of experience with one of our ferries and testing in our tankers.
Because of this, we can see a little bit further than others with methanol in both the short- and long-term. It’s a working technology that can become carbon-neutral when we get “green-methanol” in place. With investments in new and old ships, we’re confident we can reach our 2050 goal.
Can you describe other Stena innovations, such as the InfinityMAX?
InfinityMAX started as a conceptual project back in 2018 to test ourselves. It’s an electric, modular hybrid bulk carrier designed to meet the world’s need for sustainable, zero carbon, efficient and flexible seaborne transportation.
In the Stena Group, we’ve had many concept ships to push development. We test and observe things to determine if we should adopt portions of the concepts for existing or newbuild vessels. The InfinityMAX would be an entirely new way of operating bulk and tankers. Could it happen? Yes, but it wouldn’t be until 2030/5 unless we get a committed 15-year partner to go on that journey.
It’s a big step and a high hurdle, but it gives us the mindset of possibility and of testing concepts like carbon capture and new fuels like methanol, hydrogen and ammonia.
We’ve also found that, as noted earlier, methanol works. We found hydrogen may not be applicable for deepsea shipping. We still have many concerns about ammonia that we are not sure we can overcome, and carbon capture is being worked on both onboard and ashore. However, carbon capture’s impact must be considered from “well-to-wake” and not just from “tank-to-wake.”
Digitalization is becoming the new norm in shipping these days. What projects or initiatives is Stena undertaking in this area?
We’ve been a leader in shipping’s digital journey from the beginning and have been at the forefront with partnerships and collaborations, depending on what the digital world is creating for us.
In 2016, we developed a spinoff of Stena Bulk called OrbitMI, a company based in New York and initially focused on the efficiency of the ships to track and take quick actions if we had challenges with bunker consumption. Through Orbit, its cloud-based software offering, we’re making our commercial operations more sophisticated and transparent. The portal also helps us track, measure and report on emissions.
Operationally, Orbit is instrumental in getting information right, in order, and to the correct systems. Orbit takes commercial decision-making to a higher level, where we see added value through our earnings. Increasing fuel efficiency by 20 percent equals 30,000 metric tons (MTs) of fuel oil saved and a reduction of 100,000 MTs of CO2 emissions over two years, saving us $15 million.
How did COVID affect operations? Any lessons learned that others could benefit from?
Something that we recognize is that we all miss each other. Having offices around the world, it’s been a difficult couple of years. Building and keeping culture is hard via Google Teams, particularly with new hires I’ve yet to meet. Organizations really had to work on what they stood for and demonstrate direction.
However, during COVID we found that digital inspections conducted remotely are fantastic and efficient – much more efficient than before. You don’t have to worry that it will be canceled if someone misses a flight. It happens when you need it and to a very high extent. In all fairness, you cannot complete all aspects that way, but we’re very happy to continue development with our technical managers and R&D department.
What is your biggest challenge right now, and how are you responding to it?
The biggest challenge is the market environment over the last twenty months. We were lucky to lock in ships at some good rates, but those have gone, and 2021 we just want to forget due its being the worst year in the market.
We’ve said, “It’s going to get better in the next six months” over the past eighteen months, but we’re still here. Day rates for a Suezmax – depending on if it has scrubbers or not, which we’ve added to all our Suezmax vessels – is a difference of $8,000 to $9,000 per day, which is a huge number. At a snapshot for today, the going rate is $20,000-$21,000 per day. Just a week ago, it was $7,000-$8,000 less. To break even on a Suezmax, we need $22000-$23,000 per day.
On average, last year was $11,000 per day. To lose $11,000 a day per vessel, it’s taken really deep pockets to survive. However, some other vessel types and geographic markets are starting to recover. Not so much in Europe, but elsewhere. We remain committed to the long-term.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.