Thus, Feb 24 2021 - Episode 8 - HMM CEO Interview
Hi, I'm your host Dr. Dr. Reagan. In this episode, our special guest is Mr. Jae-Hoon Bae, CEO and President of HMM Co., Ltd., one of South Korea's largest shipping companies, HMM operates over 130 state-of-the-art vessels encompassing more than 50 sea routes to over 100 ports of call around the globe. It boasts 12 of the world's largest super-class ships, part of a trend that has seen dramatic growth in the size of container ships in recent years. Yet despite their size, the HMM super ships are highly efficient and eco-friendly. A self-described renaissance man, Mr. Bae talks about how HMM is leading the charge in helping to transform the maritime industry, using next generation eco-friendly ship technologies. Mr. Bae, thank you for joining the show. I know you're a busy CEO of HMM, it's a big shipping company in Korea, and you've had a successful 2020
and a lot of that I think is starting to come out based upon all the investments you're doing around technology and eco-friendly types of ships HMM has been active in using smart shipping technology. Can you talk about the reasons behind this? Yeah, I think there are 2 reasons behind it. One of the most important things is the vessel operational safety. Second thing is the operational efficiency to save the costs. So for the vessel operational safety, we utilize technology such as the real time monitoring and remote control and external specialist support. I mean external
is the not only the crew in the in the vessel, but in our, you know, the center, you know, in the control rooms are the specialists watching the situation, if needed to provide immediate advice. So, that means external specialist support. And also for operational efficiency, we are using technologies such as Big Data Analysis and improving fuel efficiency. You know, if you speed up, twice [2X speed] fuel efficiency becomes [is affected by] eight times [8X]. So, I mean we should have maintain
very economical speed. So, with the, you know, using all the data we are improving fuel efficiency and also maintaining optimal equipment conditions. We are watching all engine rooms and everything. So, we are providing the, you know, the maintenance part earlier than just when it happens. So, we reduce the cost and the time. So, those kind things are the technology behind it.
And also detailed technology behind operational safety and operational efficiency is technologies such as autonomous navigation system and route optimization, weather information updating, auto berthing and also autonomous identification systems. Those kind of technologies is what’s behind it. Also we have technologies called the integrated maritime information technology. So, we’re watching the wave conditions, weather conditions… everything, and we decide the direction of the vessels, those kind of things. And also we are using technology [such] as data communication between the ship-to-ship, ship-to-control center and security. Those kinds of technologies are behind it terms of smart vessels. We started our smart vessel from [beginning with] 24,000 TEU vessels. And this year we plan to deliver eight 16,000 TEU vessels also equipped with
this smart chip technology. And eventually not only those, you know, we operate new vessels, but we possess old[er] vessels. So we will install this kind the smart technology in [older vessels] one by one. And also, not only our own vessels, but we also have chartered vessels. We will talk with owners of charter vessels, adopting those technologies eventually. Okay, that’s the plan at the moment we have. And the future technology will adapt to this kind of a smarter vessel technologies like, around view [360 view]
monitoring of a ship, not only just from viewing but also, you know, from behind, you know, the side, those kind of things. For this, we may use drone technology also. Drone operation technology on top of the vessel is watching all the, you know, the situation around [it]. And also augmented reality, virtual reality, those kinds of things. Ultimately, we want to pursue technology called the Digital Twins. So, in the control center, the person is maybe virtually the same conditions as a person
in crew. So to do that, we need the augmented reality, virtual reality kinds of things. And also wearable camera systems. So to provide the same conditions like a crew, the crew will wear some kind of, you know, device, then the, you know, the guy in the control center is using some virtual camera, virtual screen, capturing the same thing like him. Not the usual case, [but] say in an accident, in the engine room, then, you know, the those guys are wearing a virtual device and experiencing the same things. Those are the kind of things
I want to try to pursue. And cloud platform, the crew training and simulators. We already have simulators, but we are enhancing simulators. Those kinds of things will be the future technology we’re going to adopt for smart shipping. And through this, we are going to ultimately pursue Digital Twins. I knew that HMM, had been using a lot of technology. And what you described was actually way more than I had understood, which is, which is fantastic. You know, many car companies are reinventing themselves into technology companies. And I can kind of see that with HMM, as well. It's really fascinating.
You mentioned before about fuel efficiency as well. And I think that you're adopting a lot of eco-friendly technologies. Can you talk a little bit more about that? Oh, yeah, actually for the environmental kind of things, we have two major regulations. One is sulfur oxide or [also] called sox regulation. So, you know those kinds of things, impact, you know, a lot of the climate. Previously, we used sulfur oxide that contained 3.5% in the bunker. But now, they regulate we should use 2.5%. From this year…from last year, all the, you know, the fleet should they use the, you know, the self-contained bunker, but in our case, we installed what they call a scrubber. Scrubber means, you know, without sending the, you know, sulfur oxide to the air, I mean [up] the chimney.
We put a lot of water and then drop down [send it down] those [chimney], you know [to reduce] the [sulphur] exposure to the air. So, we use scrubber technology. So, [with scrubber technology] you can use the 3.5%, I mean, traditional bunker, so that also can save costs a lot. You can save not only the cost, but also the pure efficiency means not just, you know, using [reducing] high sulphur, but we should maintain the economic speed.
You know the, let's say, one time, [during] weekly one time service to Europe, if we use the speed like 22-23 knot, we may need 10 to 11 vessels. Maybe 10 vessels because we are using a speed of 23 knot. But now we are using [a speed of] almost 13 knot, a very economic speed, [so] then, you know, the lead time is going to be a little delayed.
So [we need] to [use] 12 vessels. That’s why we ordered 12 you know, 24,000 TEU vessels last year. So again, 13 [knots] to 26,000 [TEU] is almost twice [2X]. Then the bunker consumption is 8 times higher. So the maintaining those economic speeds are very essential.But if we talk about the more eco-friendly, the technology, I mentioned about the sulphur regulations. So, I mentioned we installed all the scrubbers. Those eighteen, no, twelve 24,000 TEU vessels or eight 16,000 TEU vessels, we started [using] scrubbers in all of that. But not only them, [but in] our own vessels, we already installed, [in] most of our vessels, we installed scrubbers.
Even [in our] chartered vessels, we installed scrubbers. Our own vessels, we installed 89% scrubbers and the total vessel this year are going to be about 84% (by TEU). But vessel by vessel, you know, there are different sizes of vessels, but TEU-wide are we installed 84% for all vessels. But vessels, you know, quantity wise we can install 70%. Another big regulation is the greenhouse gas, you know, especially CO2. So, CO2… [since] the scrubber doesn't matter [help] with the CO2, you know, the disposal, you don’t need to use the sulphur disposal. So, to reduce the CO2, we need, you know, to use such [things] as, for example, hydrogen, ammonia or bio-fuels.
So, I mean, also slow speed and big size can reduce the, you know, the CO2 consumption by TEU basis. But, ultimately to reduce [CO2], the ultimate solution is to either use electronic battery or hydrogen or ammonia kind of things. But, batteries. My assumption…I was engineer before, you know. My background, my major in College was EE.
So, with my knowledge, it may be, you know, [acceptable to use] for the car, but for the vessel, how many, you know, big-size batteries should we install? Then, you know, the [batteries impact the] weight of vessels and also they can consume, you know, the storage space [needed] for container or for the cargo. So, I don't think you know, battery is a solution. Also, hydrogen. We need - 27 degrees C temperature to contain the hydrogen as a liquid state. Also the pressure of the liquid on the tank is tremendous. So the current energy cannot [use hydrogen effectively]. If you want to utilize hydrogen we need more thick tanks and we need, you know, technology to maintain the those tank, below minus of 27 degree. [For] LNG tank we need minus 160 degree. So, quite different.
Ammonia is almost the same. [With] ammonia gas, there are no CO2, you know, disposed, but in the tank we [need to] maintain minus 160 degree and the pressure to the tank almost the same as LNG. So, maybe next thing is we may go LNG vessels and converting it to the ammonia gas consumption. Then we need to retrofit the engine. It may cost, you know, like $20 million. It depends on the vessel size, but just roughly something like you need $20 million dollars retrofit cost.
If it is an LPG vessel, LPG carriers, then there are less retrofit costs, but there are much [less] LPG vessels. There are a lot of LNG vessels. So, we may go LNG and then [after that go] ammonia. But [with] our bunker technology scrubbers you may utilize the bio-fuel such as ethanol or biodiesel you know. In the home we are use a lot of oils, you know? Olive oil, you know, a lot of those kind of oils.
And we refine those things and utilize them as fuel. But the quality's not you know, the equal and not easy to collect. So maybe we’re thinking something like ngreen technology, you know, the fuel material you can take it from the wood chips. So then you can utilize the current, you know, the current tank of the bunker.
The current engine maybe we don't need much retrofit cost. So the I think we already invested a lot for the bunker plus scrubber. So those vessels maybe we’re going to utilize biofuel such as ngreen. In the future, new vessels we have not firmly decided, but I'm thinking, [first] LNG and convert it to the ammonia later. The problem of the LNG is bunkering, you know, the facility. It is not in the older ports. So, container vessels, they are allowed already [a certain] size, so maybe [the ones already allowed] can go there. But in case of bulkier vessels,
we don't know where [they can] go. So, whether they have a bunkering capability or not those kind of things is something we need to be concerned [about]. So is it important to decide. But again, I'm thinking maybe [for] new vessels, I’m thinking to go to LNG at the moment because ammonia too expensive now. We are waiting until ammonia become more cost effective, then we [will] put up the retrofit costs and convert it to the ammonia. But existing vessels using scrubber [technology] maybe go to the biofuel. So that’s our strategy at the moment, our readiness for eco-friendly technology. So one never knows how much a CEO has to understand about things more than just sales and spreadsheets. Right?
I think your engineering background is helping you quite a bit. I'm trying to be a renaissance man. I'm drawing and painting. I'm cooking. I make a bread. I'm a terrible cook, but I'm doing 서예 [Korean calligraphy] a lot. So I'm trying to be a renaissance man in a different way. A 조선 [old Korean era]…. A 조선 [old Korean era]….a 선비 [Korean scholar]. Okay. Okay. Yeah, a 선비 [Korean scholar] is a very important thing. I think, I think it's worth trying to be a good one.
Yeah, are already more than a pure Korean. I have many things to learn. Yeah, very good. So let's move on to something that's also very interesting, which is this smart ship Control Center, which has been in the news quite a bit. How is that expected to benefit HMM? Yeah, I mentioned for smart ships we need the, you know, the external expert, you know, support. To do that we need to do control centers.
So, again, ultimately, the goal is to maintain Digital Twins. So, we, you know, see almost same conditions virtually in the control centers. We are watching the engine situation, you know, vessel speed, direction, but with the weather conditions…everything like this. So, not only cruise technology, but also you know, there are much specialists on the [support] side.
In Busan, they are watching the situation together and, you know, they advise, you know, in advance. But also if anything would happen, they collect there and, not only one specialist, [but] all the specialists gather there and see the whole situation simultaneously, and advising. Also technology behind this… actually, our you know, fleet control center [is] structured by 3 sections. One is the main control room, the second is a safety room.
So, third thing is the performance rooms. The main control center [is] watching everything, but the safety room is, they are [watching], the you know, stability, you know, tilting, those kinds of things, weather, the sea condition all those kind of things. Also performance. I mentioned fuel efficiency. So, those are kind of things, you know, watching the best cylinder, and directing you know. Ultimately, all the decisions should be done by the captain, but they advise , not direct. Sure. Even though we advise, that decision should to be finally made by the captains.
Yeah, I've also seen a little bit about this SVESSEL… We ordered seven 24000 TEU vessel [from] Daewoo and 5 vessel [from] Samsung, and eight 1600 TEU vessel [from] Hyundai Heavy Materials. So, you know, they all have their own smart technology. Not identical, but almost the same. They can communicate without control centers. So basically SVESSEL is the smart technology called by Samsung Heavy Industry. Not only the shipbuilding company, but also with colleges and also R&D organizations and the government, we made a lot of co-development MOUs.
So, we are jointly developing this smart technology. But the ultimate goal, other people say is the autonomy vessel. Autonomy car means the even though the driver, the car, you know, moves just, you know, automatically. So, even in a vessel, you know, autonomy operations may be possible, but still we need a crew, by regulation. Also, we don't have many crew. Even for 24,000 TEU vessel, we only need almost 20, just around the 25 crew total. So, the size of the vessel is almost like 4X size of the football playground and [as tall as a] 20 story building. But you only need, you know, 25 crew.
So, we may still need, you know, around 5 to 10 crew even though we make autonomy vessels. So [like] in the airplane, they can control… autonomy control is possible. But still there [is a] a pilot. So I think the captain and the, you know, the navigators, engineers, certainly, you know, the people we may [be] need[ed] even though we go to autonomy. Any future plans for additional smart shipping technologies that are going to be adopted?