Good morning, everyone. It's a pleasure to welcome you at Hapag-Lloyd's virtual Capital Markets Day. We would have loved to welcome you in person today, but unfortunately, the pandemic still does not allow us to hold those events physically. We hope strongly to have you with us, and next time, in person again. Today, with me on stage are Hapag-Lloyd's CEO, Rolf Habben Jansen. Good morning, Rolf.
Good morning, Heiko.
Hapag-Lloyd's CFO, Mark Frese. Good morning, Mark.
Morning, Heiko.
Both will guide you through the presentation that we have prepared over the next, let's say, 2.5-3 hours. Of course, we plan to finish around 12:00-12:30 German time. We have planned to guide you through a presentation. We have made a couple of slides and switched that into two sessions more or less. In the first session, Rolf will give you a short recap of Strategy 2023 and the reasons for our strategy review, followed by our sustainability strategy presented by Mark. Before I hand it over to Rolf, please let me briefly make a few organizational remarks. The presentation will be followed by a Q&A session. We'd like to invite you to join our discussion and ask your questions right here on the screen.
If you wish to participate, you can use the hand raise function in Zoom, and we will switch you live into the studio. In addition, you have, of course, the option to submit your questions via the Q&A tool. Of course, we would love to see you, live, and hear you here in the studio, but nevertheless, there's the option to raise your questions via this tool as well. We plan to answer all your questions throughout the day. In the case there are too many questions, we might not be able to answer all and everything. In this case, we will reach out on an individual basis afterwards. Now, I would like to ask Rolf to start with his presentation. Please go ahead, Rolf.
Thank you very much, Heiko. Thanks everybody for making the time to join us here this morning. I very much appreciate it. I mean, what we'd like to do with you first is to give you a quick overview of the Strategy 2023, which is basically where we are, what we have achieved and what we have not achieved just yet, and what we still need to do better. Then afterwards, I'll hand it over to Mark and talk. He will talk a little bit around sustainability. Let me go back, though, a little bit to where we started when we made our Strategy 2023, which we also presented to you back in 2018.
We did that then, on the back of what was a pretty unprecedented wave of consolidation. We also had done quite a few things as Hapag-Lloyd already, as we had been able to improve profitability and our cost position quite a bit on the back of the mergers with CSAV and UASC. Having said that, we were also at a point where we had to think hard, and where it was not no longer only about unit cost and economy of scale. At that point in time, we came up with our strategy, which in essence was all about delivering better quality as we felt, and still feel that those are things that are increasingly determining who will be successful and who will not.
That means that, as you may remember, at that time, we defined our strategy, and basically said there are three main objectives that we would like to achieve. The first one being try to deliver this unparalleled quality, become more customer oriented, and create value every day. I think even today, that's more relevant than ever, yeah. But at that time, I think we set out what we wanted to do, and I'll talk a little bit later about what we wanted to do more specifically on that. We gave ourselves the objectives to be not only profitable when we have an upcycle, but clearly also when the cycle is down.
As I think one of the main challenges of the shipping industry has been when you look a little bit further back than a couple of quarters, is to deliver returns to shareholders all the time. That's why we said we need to be profitable throughout the cycle. We said we'd like to remain a global player, yeah, which builds on certain markets where we are strong, but also tries to grow in some of the markets that we consider to be attractive and where we believe that growth is gonna be stronger than average in the long run.
In terms of the market share, we said we'd like to aim at a market share which is around 10% globally, excluding intra Asia, because we believe that in most of the markets, that will actually give us the scale that we need in order to be competitive. As you may remember, we at that time tried to summarize it all in one page where we said, on the one hand, we will always continuously need to work hard to earn and keep the right to play. As this is an industry and it may not seem maybe like that today, where continuous cost management is going to be also in future incredibly important. That means that we need to focus on that every year. Same goes for revenue management.
We need to make sure that we get the best possible cargo mix on board. Those are the sort of basics that were relevant in 2018, and that will also remain relevant going forward. We then defined a couple of levers to differentiate ourselves from others. One is this point on quality. The second one is building a stronger inland capability. The third one is growing in somewhat attractive markets and segments where you can achieve better than average yield. We talked about taking our environmental responsibility serious, probably today even more relevant than at that time. We launched our online channel, and we've always said that in terms of M&A, we'll only look at it opportunistically. Of course, we need to further develop our organization and invest more in digitization and automation.
What did that bring us? Because when we look back on that strategy that we defined in 2021 and where we said that's what we want to achieve by 2023, then I think it's fair to say that we have made very good progress on that. Although, of course, this year has been very extraordinary, I think it's worthwhile pointing out that also in the years since 2017, we have made steady progress. If you look at our equity ratio, we've been able to pay dividends every year, and we have been getting quite close already to our target 45% towards the end of last year. When we look at our return on invested capital, we've been growing steadily.
I would say that even without the peak that we saw since the end of last year, we would have been hitting our WACC in 2020. Of course, this year is very extraordinary. In terms of our leverage, when we closed the transaction with UASC, that was very high, but it has been steadily coming down, of course, today to very low levels. Now, let me talk a bit about the other topics that we put in there because, in the end, you can talk about the financials. There, I think very healthy progress, and that gives us also some room to think beyond our strategy today, but still good to also hold for a minute at the key points of our strategy. The first one being quality.
We defined at the time when we launched our strategy ten what we called quality promises, and meantime, we have launched eight of them with numbers nine and 10 in the pipeline. I think that's still given our organization quite a lot of focus and things to work on. Even if a lot of people today are probably not happy in terms of the service that they get from the shipping lines, also because there are simply so many delays that the predictability of the service is not there where it's supposed to be. I would still point out that our actual performance in terms of how do we perform against those quality promises is actually improving.
We are today getting close to or are achieving our objectives in seven out of the eight quality promises. If you go a year back, that was just two out of eight. Also if you compare it to 2019, so pre-pandemic, our actual service delivery in many aspects is actually better than it was. Having said that does not necessarily result in only happy customers because, of course, everybody would like to see their boxes loaded on the first available vessel, and nobody would like to see significant delays such as we see them today on many of the services. All in all, though, I believe that we are on a good track there, even if definitely still more can be done, but we'll talk about that also in the future.
When we look at the online channel, we set ourselves a target in 2018 to grow our online channel to become about 15% of our overall business by 2023. If we look at where we are today, I think it has definitely surpassed all of our expectations. As of today, we are close to 25% of our business that is going online. There is certainly still more potential if we would go beyond the short-term segment, which is the main segment that's currently being served through Quick Quotes.
When you talk to our own people, but also when we would talk to experts a couple of years back, when we started in 2018, I think many people were really skeptical about what one could achieve, when in terms of selling online in shipping. Now to see that we are at, say, 25%, so a multibillion-dollar business, I think that's pretty amazing in and of itself, and just underlines also the importance of digitalization also in this industry. When we look at attractive markets, we've done quite a bit. I think in this chart, the emphasis is very much on new services and on the markets where we have been growing.
Certainly one or two markets to point out. There are India, where traditionally Hapag has had a strong position, and Africa, where if you go 10 years back, we were really a small player. If you look at our position there today, we have a very decent position in most of the markets. We have also opened up quite a number of our own offices and will continue to do so. Also the investment we did in Tangier will help us to serve those markets better. All in all, particularly India and Africa, I think underline our attractive market strategy, and I think we've been pretty pleased with the progress that we've made there.
Of course, that's also where the acquisition of NileDutch plays a role which we concluded in the course of this year. What you don't see here on this chart, but which I think is also worthwhile mentioning is the growth that we have seen in some of the more profitable segments such as reefer, where if you go back to 2018 and you look at situation today, we've steadily been growing with 10%+ each year. I do believe that that's a good thing, yeah.
We have invested in that also significantly, and we will continue to do so as we believe that that's a segment where there will also be above average margins in the long run and where we can still grow our share a bit more than what we have today. The other segment being the specials, yeah, so project cargo, break bulk, and also everything which is out of gauge. Yes, that segment was down a bit throughout the pandemic, but also there we see certainly in the last couple of quarters actually quite healthy growth. If we look at the last two years, I think the world has definitely changed and I think that leads us also to think again about, you know, what should we do going forward.
We'll talk quite a little bit more about that later on, but maybe let me already give you a couple of pointers on what has happened. We've certainly seen spot rates skyrocket. We have seen a lot of bottlenecks in the supply chain. We've seen sustainability become a lot more important, and the pace of digitization compared to a couple of years ago, the pace at which that moves forward is up very, very significantly. Also, when you look at a couple of data points and look at what's happened in the last years, we show you here four graphs that sort of show all the same type of picture.
They show you that on the one hand, spot rates have gone up very significantly here, illustrated through the SCFI. Then we also see that on the cost front, quite a lot is happening. I mean, if you look at the Time Charter Index, you can see here that if you compare it with about a year ago, that the Time Charter Rate Index has gone from below 100 to 400 at this point in time, which of course means that for everyone, that daily running costs are up very significantly. We also see bunker consumption price going up quite steeply. I mean, we all read in the papers all the comments that are out on the cost of energy in the last couple of months. We certainly see that also in our business.
If you look at the graph, you indeed see a spike as IMO 2020 came. Then, of course, there was a trough as the pandemic hit us. Now we see it steadily going up, which also over time will have an impact on unit cost. That's also what you see when you look at unit costing for Hapag-Lloyd, and this is even excluding the cost of bunker. You can see that since 2019, the unit cost has actually gone up with about 20%, which is quite a lot, yeah, over such a short period of time, and certainly very different from what we have seen in the 10 years before.
Yes, quite a significant chunk of that is congestion related, but there are clearly also a number of structural cost effects that will probably remain also in the longer run. If we look at what has caused all of that, I do think it's important to go back to the basics, because in the end, demand is the one that probably has triggered this whole crisis that we are currently facing. I still think that if you look at the graph on the left-hand side, which is around U.S. consumption expenditure, that tells quite a significant chunk of the story, yeah. As we saw that when the pandemic started in Q1, Q2 2020, that of course, the demand for services came down very significantly.
Even until today, it's not yet back at the level that it was pre-pandemic. Where has a lot of the money that has been put into the economy by many of the governments and through all kinds of stimulus measures? It has gone into consumption. I think it's fair to say that when you look at the forecasts and the predictions that were made by pretty much everybody in the beginning of the pandemic, that there were very few that were predicting that the demand for goods would go up as steeply as it has. Then, of course, you end up in some kind of perfect storm where demand is very strong.
On the other hand, there are all kinds of COVID-related measures that are being taken by many governments which make it difficult to transport as many goods as we used to do. That combined with lagging investment in the industry in the years pre-pandemic causes a squeeze, which is actually what we're seeing right now. I remember that Mark and I were talking about this topic when the pandemic just hit, and we were speculating between us, could this not result in an enormous boost of the demand for goods? Which we then said, "Well, that's probably a low probability, so let's not make that our base case." I think there were many people who looked at it like that.
Now we are where we are, and in reality, we'll probably still face a fair amount of work before we get ourselves out of this congestion. You can see that also when you look at global schedule reliability across the industry, which has gone down from 70-80%, which I would say is average and still not great, to below 40% these days. Unfortunately, when you look at 2021, the line is actually fairly flat. Wrapping that up and looking a little bit at our strategy, what is our conclusion? Our conclusion when we did the mid-term strategy review was that the objectives that we've set ourselves for 2023 definitely remain valid. But there is still more that we need to do around quality and sustainability.
On the financial front, we have achieved a number of our targets quicker than we thought, yeah. That also means we have more room to do things going forward. In terms of market share, we are roughly where we wanted to be, and sustainability certainly being a key topic going forward. You know, I believe that's also an area where the industry has a real responsibility, and where we have to pick up our game. I think that's also why we will talk more about this now, and there I'll happily hand it over to Mark, who will take us through some of the things that we're planning there. Thank you, Mark. Yeah.
Yes. Thank you very much, Rolf. Now coming to our sustainability strategy, part for today. Our Strategy 2023 has indeed proven right. As explained, the world has changed over the last 2 years quite dramatically, and therefore, we need to focus even more on quality and sustainability. The climate conference in Glasgow has shown quite clearly how important it is to accelerate global efforts to address climate change. We, as a global company, we also have to take our global responsibility for the environment in the countries where we operate, for sure, for the ocean, and of course, for the global climate. Future challenges require a holistic sustainability strategy. That's what we are working on right now, and ambitious greenhouse gas reduction targets.
I think it's important to say that we are showing a status today which is quite evolved and improved, but nevertheless, a sustainability strategy has to be flexible, and we have to work on that day by day. With our mission to become quality carrier number one, sustainability has to be a key focus of all what we do. In particular, our corporate value, we care, is closely linked to our responsibility towards employees, the society, and the environment. Coming to where we are coming from. Sustainability for many years was in our DNA or in Hapag-Lloyd's DNA, and quality and the environment were the starting points for our sustainability activities many years ago. Already in 1992, we implemented a quality management system. Several certifications according to ISO quality and environmental standards are binding environmental guidelines, and we for sure follow them.
The first Hapag-Lloyd sustainability report has been published for the year 2017, and through this year, yearly sustainability report, we have already communicated our sustainability activities more widely to the public, which is important and needed. After preparing for the sulfur regulation in 2022, we have strengthened our emission reduction efforts by converting an LNG-ready vessel into a dual fuel ship, also as a test, as well as testing and using biofuels on a larger scale. By setting a green financing framework in 2020, we have established a framework for our green financing program under which we issued debt instruments contributing to the decarbonization of Hapag-Lloyd. With a green financing framework for our 12 dual fuel ultra-large vessels, we have been breaking new grounds in financing by concluding transaction according to the green loan principles of the Loan Market Association.
Those have also been verified by an external party, so DNV has proven that by a second party opinion. This year, we are also successfully, and you might know that, issued our sustainability at the first sustainability-linked bond in our industry, which is linked to the achievement of our clear sustainability target for CO2 intensity of our own fleet, and we will come to that in a minute. Today, we published our sustainability strategy to you, a broader audience, and the public. Looking at what we have achieved. We have already done a lot, and consistently establishing measures and technological improvements over time, such as converting the first large container ship, our Brussels Express, as you know, to a dual fuel propulsion ship, with the aim to run the vessel on a green e-methane once available.
That is important, once available, and we would like to do that as fast as possible. We are using biofuels today on several vessels. We are lowering emissions, thanks to optimized bulbous bows and propellers. We have been achieving fuel savings of roughly 15% per vessel by removing the fouling on the exterior. We are fitting a number of vessels with onshore power equipment, which helps, for sure, to significantly improve air quality and reduce emissions in the port. For sure, you know that we are using IMO-compliant fuels since January 2020, when IMO regulation kicked in, leading last year to a 7% reduction in sulfur oxide emissions of the fleet operated by Hapag-Lloyd when we compare that to 2019. We are also a founding member.
We are founding member of the Ship Recycling Transparency Initiative, and some of these and several other efficiency measures lead to significantly reduced consumption per slot of our close to 60% last decade, so it's a strong reduction per slot, but also to a 40% reduction of the CO2 intensity of our own fleet if we compare that to 2018. We all know we need to do more, and we have to set ourselves further targets, reaching far out to continue to sustainably serving all our shareholders. Regulatory requirements are increasing, such as the EU Fit for 55, CII or EEXI. Other customers are increasingly looking for carbon reduced transport and products and more transparency within their supply chain.
With initiatives such as the Poseidon Principles, sustainability is becoming increasingly important in ship financing in the capital markets, and that will strongly increase over time. Social responsibility and environmental protection have been a core issue in modern society, and should be. Talking about Paris Agreement, climate change is for sure the biggest challenge of modern age, and may become a disruptor for economic growth and wealth in future. Ocean shipping is the primary conduit of world trade and a key element of international economic development. 90% of all goods worldwide are currently transported by ship, and container shipping is one of the world's most carbon efficient mode of transport, as it emits much lower CO2 per unit transported when we compare that to air, rail, or other forms of transport, like road.
Still, the industry is collectively responsible for around 3% of all CO2 emissions. On this basis, one of the expectations we place on ourselves is to further minimize the environmental impact of our actions, because we have to decarbonize shipping. With that, we will contribute to the decarbonization of other industry through the cargo we carry on their behalf and with the demand we are creating to producers. However, decarbonization of ocean shipping, as we know it today, is a complex project and will not be finalized tomorrow. That is why we, as a market leader, are strongly focusing on dialogue with all stakeholders to work jointly towards our common goal and the decarbonized future. We can do a lot ourselves, but to reach targets, these ambitious targets we are setting ourselves of the Paris Agreement, we have to join forces.
Looking closer at our sustainability strategy, with our comprehensive strategy we are showing today, we want to strengthen our sustainability contribution step by step and reduce our negative impact on the ecosystem at its core. It's all about continuously strengthening our sustainability related efforts and achieving incremental improvements, you could say, day by day. We have defined goals and measures for 8 focus topics for the next 10 years, and that's what we are talking about today. Some of the goals have already been quantified, others will be further specified in the upcoming couple of months and years, and they have to be, as I said, updated regularly. We have clustered the focus topics into three main areas. Firstly, clean shipping and future-proof propulsion. For the greenhouse gases, clean air and sustainable supply chain play quite a significant role.
Our strategy focusing on greenhouse gas emissions, we want to show a path to decarbonize, even if it's not finally defined today, because not all technology is at hand, or is at hand the volume we would need. Second key area is diversity in society. We want to make progress in the area of diversity and benefit from having a quite diversified workforce. We will also continue to strengthen our role in the area of corporate citizenship and define very precisely where we would like to intensify our efforts related to social commitment. A third focus area is compliance and responsibility, which covers resource conservation, transport care and biodiversity. This includes, for example, the well-being of our crews, the environment, and the cargo, as well as our impact on biodiversity of oceans and marine animals. Decarbonization is our core strategic goal.
With more than 250 ships we are operating, owned and chartered, we have a lot to contribute. If we change, it really counts in terms of our reducing emissions and advancing alternative propulsion. We want to reduce CO2 emission intensity for our entire fleet by 30% until the year 2030 compared to 2019. This is in line with our sustainability-linked bond target of CO2 intensity reduction of our own fleet by 60% by 2030, and that is in comparison to 2008. On the way of decarbonization or to decarbonization, we want to operate our ships in a climate neutral way using alternative fuels. It is our strategy and strategic goal to become net zero carbon by 2045.
2045 sets for us a clear internal and external signal that it is time to speed up all initiatives to cooperate and to search for new solutions. Measures we are taking to achieve our greenhouse gas reduction targets will basically focus on fleet and fuel related measures, as well as further increase our operational efficiency, because that can be done today and will work and contribute today. Regarding our fleet portfolio, we are concentrating both on new vessels but also on our existing fleet, and this includes not only our own vessels, but for sure, also our chartered capacity. You know, with the order of 12 new dual fuel ultra large container ships with a capacity more than 23,000 TEUs each, we have already made quite a big first step.
At the same time, we have ordered 10 new fuel efficient 13,000 TEU vessels that will drive efficiency of our fleet and reduce emissions. Zero-emission technologies will be the key driver for our ordering decisions, although those are not yet or only limited vessel sizes available, so we have to look what we can push in that regard. Measures we are taking in regard to our fleet are the consequential phase out of old and inefficient vessels, continuous technology improvements of our own and chartered fleet. That was something we already mentioned, bulbous bow, hull coating and for sure, engine improvements. We'll constantly review and update our charter vessels, which also have to fulfill the certain minimum standards and at the end, our greenhouse targets. To the extent economically viable, we will retrofit further existing vessels to dual-fuel propulsion technology.
We will drive that transition from fossil fuels to advanced bio and e-fuels for existing vessels on a larger scale. In addition, we will use biomethane for LNG dual fuel new builds as of delivery in 2023, 2024. Once alternative fuels like bio e-fuels such as methanol, ammonia, and others will be available at a larger scale, we will also consider using these. The third and very important focus area is the operational efficiency of our fleet and our network. We constantly review our global network in order to optimize the use of our ship system in total. We optimize the port rotations, port stays, and number of round voyages quite significantly, because that contributes to the efficiency and fuel consumption of our fleet, and as I said, it kicks in immediately.
In addition, we are also constantly optimizing the speed profile of our vessels as well as the cargo utilization. Again, on that, efficiency measures for our existing fleets are extremely important and effective, as CO2 footprint reduction kicks in immediately. When we talk about the future of shipping, we are convinced that LNG is currently the cleanest option available today for operating large container ships at big scale, as it's able to reduce carbon by roughly 20% compared to marine fuel, and the volume is there. The fuel industry is predominantly using that today. In addition, LNG reduces a lot of other emissions, such as NOx, especially SOx, and particles, which are reduced almost to zero. We also know that LNG or fossil LNG is only a transition fuel.
The future of the shipping industry will be shaped by the transition from fossil fuel to low and zero carbon fuels. Over the next decade, we believe that we will see a transition period, which will be more by using more and more biofuels over time, but also as a transition. Besides methanol and ammonia, we can produce or can be used and produced as biofuels. Those are all possible options. Although we don't know as of today what will be the technology at the end, we will be sure that more than one fuel will be used over these transition decades. I think it's important to say, nevertheless, scalability of FAME like biodiesel or other might be questionable from today's perspective.
After 2030, the usage of e-fuels need to be the predominant solution, as it is the only truly CO2 alternate, CO2 neutral alternative. Today, e-fuels are not available at real big scale, but it needs to be developed over time at reasonable cost to really achieve the net zero carbon target we all want to achieve as an industry. As demonstrated by the picture, synthetic fuels like ammonia or methanol, but also synthetic gas like SNG might be a solution for the future. At the same time, we can't and should not rule out any new and promising solution over time. We strongly believe as of today, that not only one fuel in future might be the solution, but maybe a mix of different solutions for different trades or occasions.
We strongly believe that the decarbonization of shipping can foster green development across other industry, as shipping is a very energy-intense sector. Demanding green fuels and propulsion technology on a large scale will also create supply and force other industry to develop these solutions and in that direction. To drive that development, we have joined various initiatives. For example, we are actively involved in the Getting to Zero Coalition and have just signed its call to action. The Getting to Zero Coalition is an alliance of more than 150 companies within the shipping industry, in this infrastructure industry, and the finance sector, and it's supported by key governments and NGOs. The objective is to have commercially viable deep-sea zero-emission vessels powered by zero-emission fuels in operation by 2030.
For a Paris-aligned shipping decarbonization, at least 5% zero-emission fuels in international shipping is needed by 2030. The call to action was launched on the 22nd of September in conjunction with the UN General Assembly. The call to action demands that governments commit to decarbonizing shipping by 2050, support industrial scale zero-emission shipping projects through national and regional actions, and deliver policies and policy measures that will make zero-emission shipping the default choice by 2030. Talking about air pollutants, we have made quite some progress in environmental and health protection since the beginning of 2020. Since then, the container shipping industry has been operating within the IMO-compliant fuel framework, with a maximum sulfur content of 0.5%.
The entire fleet operated by Hapag-Lloyd produces around 70% less sulfur oxides compared to 2019 with that change. For clean air, the legal requirements are already quite high. A reduction in greenhouse gas emissions is often, and that is positive, accompanied by reduction in other pollutants. For sure, we would like to further reduce emissions of air pollutants such as sulfur and nitrogen oxides in line with international regulations and in the course of fuel savings. Beyond the re-regulatory requirements, minimize emissions of air pollutants from overland transport in the pre and on carriage stage. We will achieve that by creating transparency in our shipping fleet and inland transport. To this end, we are setting up an emission database and support the shore-based power supply of ships in ports.
Both the 12 new dual fuel ships coming to our fleet, 2023, 2024, and the use of biofuel in a larger scale from this year on will help to further reduce sulfur dioxide emissions. When we talk about the full transport chain, we will ensure social, economic, environmental, and quality standards in our supply chain, and continuously improve transparency and reduction of greenhouse gas emissions. To be able to offer a completely green product, we need reliable information. Within the framework of sustainable supply chains, we want to purchase correspondingly sustainable services and ensure for sure compliance with the German Supply Chain Act 2023 through full transparency. We will achieve that by adjusting our procurement strategy to strengthen the sustainability criteria impact.
Expanding our existing supplier database to include data on emissions and information on compliance with human rights standards, and thereby fulfilling our due diligence obligation with our suppliers. Based on this, we use monitoring and reporting to measure the degree of target achievements and provide our stakeholders all the needed and reliable information about the sustainability progress. When it comes to diversity, Hapag-Lloyd's business model was always being based on international exchange and interaction. Following several mergers, our workforce and management is already quite diverse. For sure, we welcome and promote diversity even more with a focus on gender and on cultural diversity. In order to better exploit the potential related to diversity in our company, we have set ourselves clear goals. We want to promote cultural diversity, especially at our Hamburg location.
We want to increase this on the management level from currently 40% to more than 25% until 2030. We want to strengthen our gender diversity in all management positions. To this, we want to increase the proportion of female employees in management trainee programs to at least 50%. That you could say from today. We want to significantly increase the proportion of female managers on the first four management levels by 2030. Talking about social responsibility, we want to take, for sure, as a global company, we also have a strong global responsibility for the environment, for the society. For decades, we have supported selected initiatives with donations and sponsoring. Today, we create a framework and strengthen our commitment, especially in the countries where we are represented with our own offices.
Our goal in corporate citizenship is to raise our profile as a responsible company, both locally and globally. To this end, we have defined three focus areas that we want to support. It's for sure education programs, humanitarian aid, and marine conservation. We implement this by supporting the UNICEF Education Initiative, Schools for Africa. We believe that education is key to self-determination development without poverty, especially for girls in these countries. Through a partnership with a marine mammal advocacy NGO, we aim to implement joint projects where we better protect the natural habitats of whales along all our shipping routes. With Hapag-Lloyd Cares, we offer our country organization around the globe a framework to get specifically involved in local and regional initiatives, both with the budget and with a voluntary social environmental day.
This gives every employee the opportunity to contribute and to really get involved in one of the initiatives selected by their areas and their country offices. The program was already rolled out worldwide in August, and many employees have already actively participated in that. With regard to resource conservation, we have identified opportunities to optimize resources and approaches for the circular economy. Hapag-Lloyd is a founding member of the Ship Recycling Transparency Initiative. Each of our newly built ships has an inventory of hazardous materials. Although the majority of our containers have wooden or hybrid floors today, we consider this a transitional solution, and we want to go to steel floors as they can be recycled much better and easier.
Our resource conservation goals are, we are committed to recycle 100% of our own ships in accordance with the environmental and social standards of the EU Ship Recycling Regulation. We aim to progressively eliminate and increasingly recycle waste at our sites so that we can clearly achieve net zero waste as fast as possible. We aim to achieve our goals by boosting the share of containers with the steel floors, as mentioned, through long-term asset management and by launching lighthouse projects on transparency of materials we are using, as well as increasing the recyclability of vessels. We are also working on the permanent improvement of our services. To focus here is on transport safety. This means ensuring safety and protection of our crews, the environment, and the cargo.
We have set ourselves the goal to safely deliver 100% of the cargo entrusted to us. We want to achieve this by setting up a central monitoring system and thus increasing the transparency of lost containers, whether full or empty. In addition, we advocate for equal industry standards, which should result in as few as possible containers lost. To this end, we participate in the World Shipping Council's working group and are actively involved in this top-tier project. In terms of biodiversity, we aim to reduce the impact of shipping on marine ecosystems. We are committed to healthy oceans, that's pretty clear, and strong partnerships. For example, Hapag-Lloyd does not transport controversial goods and supports the Arctic Pledge, various whale protection programs, and the IMO's GloFouling project.
Our goals for biodiversity are zero violation of ballast water regulations and regulations regarding released substances, equal standards and transparency for chartered and owned vessels by 2024. We will achieve that by immediate and seamless analysis of given environmental data of our total fleet. We will make sure that all of our vessels have ballast water treatment systems on board to meet the stringent U.S. Coast Guard requirements. Furthermore, we support projects that are protecting marine wildlife. On top of that, we actively try to respond to feedback of external members from, for sure, science, politics, UN organizations or NGO communities. To challenge ourselves and continuously question our measures and solutions, we have established a sustainability council that is an expert panel that meets regularly to discuss the overall sustainability performance of Hapag-Lloyd.
This council consists of six external and four internal members. The external members are well-known sustainability experts from research, from the business, media, politics, and UN organizations. Wrapping up, before we open the lines for your questions, I would like to summarize the key aspects of our sustainability strategy. For sure, climate change is one of the biggest challenges ahead of us. We have already done and achieved a lot, but there's much more to do. We will do a lot more to find solutions to reach our targets and, the most important one, reaching zero net emissions 2045. With today's strategy, we have ambitious and a comprehensive and clear sustainability strategy and clear guidelines. We have elevated sustainability as an integral part of our journey to become the quality leader in our industry as an integral part in our strategy.
Our focus is on greenhouse gases as set, and decarbonization with concrete measures and ambitious targets is focus. In addition, a broad coverage of equally important sustainability topics complete our holistic sustainability strategy. There's very much to do, so let's care, move, and deliver on that.
Very good. Thank you very much, Mark. I think it's indeed a very good opportunity to open the floor for your questions before we move ahead to the second section after a short break. Just kindly remind you how to raise your question. Please use the Zoom function, raise hand in Zoom function, so to say. You could also use the chat function to raise your question, but of course, we would very much like to see you here on the stage and to also hear you live here. Indeed, sustainability is a very important topic these days. Rolf, you have attended the 2021 climate change conference just a week ago or so in Glasgow. What have been your key topics or the key takeaways that you took with you?
Well, I would say there are probably three key takeaways. I think the first one being that everybody has understood that this is serious, yeah, and that we have to accept the targets that have been set in the Paris Agreement, and that we just need to work towards it rather than debate what the target should be. I think the second thing is that everybody also sees that, you know, there are no clear-cut and easy solutions to achieve this. I mean, it is a huge challenge to get there. And that means that, you know, we will need some further technological development before we're really gonna get there.
I think the third takeaway was that when you look at the most promising pathways to further decarbonization, I think that beyond just efficiency, which is one that we should not forget, in the end, it is also about finding better fuels. Where I think three of them seem viable at this point in time, LNG, which is already available today and which would give an immediate reduction of CO2, but also SOx and NOx and particles. The second one being methanol, which I think is definitely promising, but only if it's produced green. Especially for retrofits could be very interesting. Then we have ammonia, which of course is a little toxic or very toxic. Nevertheless could also give a good contribution to that.
I think to see alignment on, yes, we need to do more, yeah, it's about efficiency and greener fuels, and we have three that look the most promising. I thought it was actually quite good to see that there was an emerging consensus in that across the industry, both in when you look at, you know, organizations, but also when you look at the liner companies themselves.
Very good. Sounds very promising. Mark, as you laid out in your presentation, decarbonizing shipping requires investments not only in new, but also in existing vessels. Are you able to provide an indication of how much this would cost? How much additional financial investments do we have to take? Not only we, but maybe the industry in total.
As we have seen with our program to buy and invest into ultra-large dual fuel vessels, you know that we have invested into 12 new ones with roundabout investment volume of EUR 2 billion.
In that, you can say that close to north of 10% is a premium for the dual fuel LNG propulsion. With that, having invested more than EUR 200 million into that technology, you can see that there will be strong investments to do to reach that. Not investing into that could be even more expensive over time. We have decided, rightly so from my point of view, to act now, invest now, and that is very important, get positive effects on our CO2 emission or footprint as soon, as fast as possible. As LNG is available today as a technology and as a fuel, we can use it right from the first day and over time when new fuels are evolving, we can, we think also use them.
Investments will be high, but investing now and moving now is important, and at the end will turn out to be better to do it now and maybe even cheaper. We all have to move. Last point and I think we also have to create demand to foster supply for these different technologies.
All right. Thank you very much. It's good to hear and good to listen that there is a clear strategy in mind and also the commitment that are here to do more and to even invest a little bit more and not to be too late because it's important to act now, as I understood you correctly. We have, in the meantime, already a couple of questions coming in, and the first one is Sathish Sivakumar from Citi. I hope we can bring him here on screen now. Sathish, I think your line is open.
Again, can you hear me? Good morning, everyone.
We can hear you.
Good morning, Sathish.
Thanks for your presentation, and good to see you, virtually actually. Hopefully next year to be there in person. I've got a couple of questions, actually. One is on the, your Quick Quote product. Could you tell us where do you expect it to normalize in terms of exposure of your total volume mix, since it has seen such an acceleration on the growth, and actually how the growth has trended in the last 12 months given the bottleneck that we are seeing? Point one. What is the exposure between the BCO and, say, freight forwarders within that Quick Quote product? Secondly, on the, this decarbonization and so on, can you give us a, color on what does it mean in terms of retrofit?
What are the unique cost economics that we should think about and the payback period, say, considering you're likely to retrofit, say, a 10-year-old vessel, how does those economics would work out? Those are my two questions. Thank you.
Very good. I think the Quick Quotes questions is certainly something for you, Rolf.
Yeah. I think when we look at Quick Quotes, I mean, that has also been developing well over the last 12 months. If you go 12 months back, we were hovering around 15%-16% of our total volume. Right now it's about 25%. I personally think it's gonna stay there for a bit.
Yeah.
That's also because we have many other obligations to fulfill as well. If we would push it further, we could probably still push it up another 5-10 percentage points. We make a deliberate choice right now not to do that. When you look at the customers in that segment, it's predominantly NVOs, but an increasing number of PCOs are also using the channel. Right now, well over half is NVOs because typically the guys that are looking for short-term space. I would say that we've seen also increasing number of PCOs using the channel as well. We'll see how that develops over the upcoming months and quarters.
Very good. Would you also take the question on decarbonization?
Yeah. I mean, I'm happy to take that question as well. I mean, you know, it's as we said, it's very much speculation at this point in time about what the type of measures are that we will need to take. I personally think that if, when you look at building new ships, it's important to be flexible in terms of technology. That's also why Mark explained that, you know, we opt in for new ships largely for, or at least one of the options is to go for dual fuel because that gives some forward flexibility. When you look at retrofits, I mean, we retrofitted one of our ships onto LNG, which is the Brussels Express, which we did last year. I think we learned that that retrofit is actually quite expensive and was more expensive than we were planning for.
In the end, that was well over $30 million that we had to invest on that, which means that economically, that's barely feasible. Unless we are able to bring that cost down significantly, converting to retrofitting to LNG is probably not the way to go. If we look at the other fuels that might become available in future, methanol and ammonia, then especially methanol seems to be a little bit easier to handle, yeah. As you, for instance, can reuse the tanks. We would expect that retrofits onto methanol are going to be materially less expensive. How much that remains to be seen. It will also depend on the vessel class and how many you do, but I think that in my view looks feasible.
Of course, at the moment, the cost for green methanol is very, very high. At some point in time we'll get into a territory there where that will become economically feasible. Whether that's in five years or in ten years, I think that remains to be seen.
Thanks again. Probably I'll join back late on the queue for more Q&A. Let others do it now.
Yeah.
Thank you.
Definitely. Hope to see you again soon. We have a second one in the line. It's coming from Anders Karlsen from Kepler Cheuvreux. As far as I've been informed, he's not with a video, but at least we can hear him. Anders, I think your line is open.
Okay.
Oh, yeah, you're there as well.
Yeah.
Yeah. Thank you very much.
All right. A couple of questions. I was thinking, you know, in terms of who do you see as the key drivers of the change towards, you know, more sustainable fuels? Are you seeing more push from the customers or is it, you know, international organizations? Who do you see as, you know, the quickest drivers there? Who will be, you know, pushing you forward fast?
I mean, I think in the end, it's probably all of the above. I think it's first of all, I think ourselves, yeah. We need to push hard to get that done also because we believe it's the right thing to do. I think it's something that comes very from the entire society, yeah. I think that's also good, yeah. On the one hand, it comes from the young people, it comes also from all kinds of institutes, and it also comes from customers. But I'd say that, you know, Mark was talking a little bit about our Sustainability Council that we established, and we had our first session there a little bit over a week ago.
I think it's very good to bring in representatives from all those groups, yeah, because you see that everybody voices very similar things. Right now, I think we're getting to a stage where it's much less about debating whether we need to do it and how aggressive we need to be. No, it's all about how can we do it, and how can we also do it as fast as possible. Because we should all not forget that it's important to do things also today and not only in ten years' time, because all the CO2 we emit we can avoid over the next ten years will not be in the atmosphere also afterwards.
I think that's where I like the way the discussion is evolving because it becomes less about ideology and, you know, conviction, but it becomes more about what can we do. It also starts to go a little bit away from it's all about only green fuels, because it will take time before those are available at scale. That means we also need to look at other things, whether that are transition solutions like, you know, biofuel or LNG, but also just pushing efficiency. I mean, Mark spoke about the new ships that we are ordering.
We shouldn't forget that if you bring in a new more than 24,000-TEU ship and you phase out IV or V old Panamax vessels, that you also reduce emissions with 50% or 60% simply because the new ships are so much more fuel efficient. Certainly for the next 5 or 10 years, that efficiency lever will still have to have a very big contribution, yeah, to reducing emissions as well, because that takes emissions out immediately, and it also means we require less greener fuels after that.
Maybe just adding-
Well, that's.
Just adding one last point. I think we even should push to go for a global regulatory framework would be very helpful when standards and structures from that point of view are becoming clearer and clearer. Therefore, pushing for that from the different industries is also important.
Yeah. I totally agree. That brings me to the next question, that goes on fuel availability. You touched a little bit on it, but it's a little bit of a chicken and egg situation where if you wanna use methanol or ammonia or other fuels, you also need the infrastructure. Are you gonna participate in bringing that infrastructure on, or do you see that as someone else's game?
Well, I mean, if I may kick that off, I mean, I certainly think we have a responsibility on that front as well. If there are projects where it makes sense, then we will certainly look at that. Having said that, you know, we are not an energy producer. We will only be able to do that together with others. I think that's where it is all about, you know, joining forces where possible and doing things with larger coalitions. Mark talked about the Getting to Zero Coalition, for example. I mean, we need to do this together. I think it's a mistake to think that when it is around decarbonization, that this is a competitive issue.
No, it's an issue that we need to address as an industry and where we need to do the right thing for the world. Whether in the end, we are going to decarbonize 5 months earlier or later than one of our competitors is not really important. What is important is that we all do it as quickly as possible, and that means that we need to join forces, because by doing that, you can do more in terms of investments, and you can also aggregate demand that is going to be there. Because you're of course fully right. I mean, to build the infrastructure for new fuels and to be able to produce them is going to take time, yeah. That's why I think you need this wider range of measures over the next 5, 10, and 20 years.
Okay, thank you. That's all for me. Thank you.
Very good. Thank you, Anders, for your question. There was indeed a question coming in, into the chat, from Deepak Maurya, which was pretty much related to the question that you just raised. From that perspective, we are not taking that up again. There's another question coming from Armand Ferreira from ING. Armand, I think your line is open now.
Yes. Good morning. Can you hear me?
Good morning. We can hear you well.
All right, thanks. Well, first of all, compliments to Rolf and Mark for the presentation of the sustainable strategy, which is all-encompassing. I mean, not only focusing on environmental parts, but also the social parts like diversity in broad sense. So very good to hear that. One of my questions was just answered actually. So that was the concern about not only waiting for the future fuel to be there and the supply and infrastructure, et cetera, but proactively as a company also not only joining, but setting up these kind of coalitions to look for solutions. So good to hear that Hapag-Lloyd is open for that and taking action. The second question I have is about hydrogen, which has not been mentioned.
LNG, of course, as a transition fuel is still fossil fuel, so even if it's mixed with biofuel, it's not the future in two decades from now. Indeed, ammonia and methanol will be there, but the availability is not there yet. What's your view on that, also considering hydrogen, if available, green hydrogen, would that be a solution also for your ships?
Well, maybe first, one point on LNG, because I agree with you that as it's a fossil fuel, it's probably a transition fuel. But also LNG can be produced through hydrogen, yeah? So I still wouldn't rule out that later on, also LNG produced in a green way remains an alternative. Also because the energy density of it is actually quite good. That also brings me to the difficulty with hydrogen, because the problem with hydrogen is simply that the energy density is too low. And as a consequence of that, the tanks you would, for example, need and the amount of hydrogen that you would need is probably gonna be prohibitive for large ships. It might still play a role in feeders and things that are mainly focused on short sea.
I wouldn't rule that out. Would say though that the most feasible e-fuels going forward are probably gonna produce via hydrogen, and then it's gonna be either some kind of liquid gas, it's gonna be a methanol type or an ammonia type thing. That was also very much, I think, that's the sort of consensus that seems to be coming out of what we also discussed in Glasgow. Can something new come up? Of course, yeah. I think right now those seem to be the three most feasible pathways. Of that, yes, fossil and LNG is something that's available today, yeah? I think what we undersell a little bit on LNG is that we talk a lot about CO2, but we shouldn't forget SOx and NOx, yeah, and particles.
That's of course where it would take out 99%+ of the emissions. I think that's not unimportant either when we look at what's the total environmental footprint or environmental effect of the fuels that we actually use.
Thanks. I see your point, and I agree with it, and I think we will need all three of those solutions.
Yeah.
By the way. If I may ask a small follow-up question, what's your view? Because it's not only shipping looking for these fuels, it's all, road transport, it's even aviation, of course. With the pace that we're working on renewable energy currently with wind turbines, et cetera, we will not get there in the next decade. What's your view on that? Is it something that will be reachable, or what would need to happen for that?
No, I mean, that's I share your concern because, you know, the production capacity to produce those green fuels is today simply not there. I know that, you know, when you go to conferences and when you hear people talking, everybody says it's not a problem, yeah. There's lots of people with very ambitious targets. Also when you look back in history, we tend to see that these type of objectives get reached quite a lot later than people originally think. I think that's what we're gonna see here as well. I mean, in the end, it's all about making choices, because if we want to produce considerably more green energy, then, you know, in the end it's all about how can you generate enough electricity to produce them.
Okay, you have to say, "Okay, what are the alternatives that we have?" You have wind, you have solar, but you may also have nuclear, yeah? Once you start thinking also about those things and take conscious decisions, do you want to do that, yes or no? I think you can actually widen still the playing field a little bit. I mean, in Glasgow, there was also some discussion on nuclear, for example, because that would help us to accelerate the production of energy quite a bit. Of course, there's quite some hesitation there from politically.
Having said that, I would not rule out that discussion also moves forward over the next 3, 4, 5 years when people see that simply looking at the sheer amount of energy that we need to produce sufficient green fuels by 2035, 2040 or 2045, you know, just using wind and solar, yeah, may not be enough.
Thank you.
Very good. Thank you, Armand. Next question is coming from the line of Andy Chu. Andy, please go ahead.
Hey, good morning, everyone, and thanks very much for the presentation. Two questions from me, please. The first one is around shipyard availability. Obviously, we're not far away from, say, 2030, 2035. Obviously there'll probably be, you know, a huge surge in terms of ship orders and retrofitting requirements. So do you think the possibility that actually bottlenecks at the shipyard could derail the timelines that you're talking about for yourselves and the industry? Secondly, around sort of ESG, and we've heard about doing the right things and around environmental issues driving sustainability. Can I just ask around the situation and your view on tax? Clearly the industry has been paying very low amounts of tax.
Is that something that should be debated a little bit more hotly for the industry? Thank you.
Well, I can take the first question quite quickly, and, you know, Mark will probably give a couple of comments on the tax point you raised. I mean, in terms of shipyard capacity, whether that will be a real bottleneck in the long run. I think my question to that is very simple because it's no. I think there will be some quarters or years where shipbuilding or retrofitting capacity could be a little bit tight. If I look at what needs to be done between now and 2045, I don't think that will be the limiting factor, and that should not prevent us from achieving our objectives.
Mark, would you comment on the tax question?
Sure. Commenting on your tax question, I think it's important to take, on the one hand side, a little bit longer-term view because you know, Andy, that we came until the pandemic out of a phase of low profits of the whole industry for years and the necessity to support the overall shipping industry. We should not get carried away by the extraordinary situation we are in right now, which is for sure, both from a service perspective, but also, from an overall perspective, not a sustainable situation. Therefore, I think it's needed to take a longer-term perspective on that. If you would take the years before, I think tax rate and support, which was needed, is in quite a good balance overall when you take it globally.
For sure, the situation right now, which is the momentum we are looking at right now is in a sense different. I think also here, supporting industry globally is needed to take also a longer-term development.
All right. Andy, thank you very much for your questions.
Welcome.
Hope to see you in a bit after the second session. We have another question coming in from the line of Deepak Maurya from HSBC. Deepak, your line should be open now.
Yeah. Hi. I hope you're able to hear me.
We hear you well.
Thanks for addressing the question on the supply chain with respect to the fuels, alternative fuels. I had a couple of follow-up questions with the decarbonization agenda. First was about what are your thoughts on carbon taxes? We've been hearing some of your peers and other industry participants speaking about carbon taxes as a way of disincentivizing fossil fuels and incentivizing alternative fuels or bridging the gap of the cost spread between these two. The second question is about would there be a different approach to decarbonization when it comes to smaller vessels versus bigger vessels? Because a significant chunk of the existing fleet, not just for yourself, but for the industry, comprises of these smaller vessels or Panamax vessels or sub-10,000 TEU vessels.
With respect to the fuels and with respect to the technology, should we expect a different approach for the sub 10,000 and the above 10,000 category? These are my questions. Thank you.
Well, maybe if I start first of all on CO2 tax, I think we've always said that you know we are in favor of market-based measures. Yeah. I think the whole industry supports market-based measures. We also believe that a part of that, at least a part of that should then flow back to the industry into R&D or yeah support for alternative fuels. Well, the way to do that, you can debate about that. I'm a big fan of me keeping it simple, yeah. Because the more complex you make it, the more difficult it will be to implement. In and of itself, to have a tax on fuels is probably not necessarily a bad idea.
We just need to think a little bit about the incentive because if you use today, for example, methanol, which is, today emits more or less the same amount of CO2, as the traditional fuel. It only starts making a difference when it's produced in a green way. Today, the production cost of it are a lot higher. How much it will help in that context to drive that transition, I think that, you know, to some extent, remains to be seen. All in all, I think we are for market-based measures because over time, that drives behavior. And if anything, it drives also people to become more efficient, which is gonna be a key lever, as I mentioned earlier, for the next 5-10 years.
In terms of what kind of technology will be used for different ship types, I also think that there will be different solutions for smaller ships than there will be for bigger ships. I think, though, that the breaking point that you indicate that 10,000 or so is gonna lie materially lower because it is going to be about ships that have much shorter transit times and that operate in essence in short sea. That's gonna be really about smaller feeder ships initially, and then we have to see how big those ships can get over time. I don't think that it will get to the 6,000, 7,000, 8,000, 9,000, 10,000 TEU ships. For those, we'll need to have one of the three pathways that we discussed earlier.
Maybe just adding on that, Rolf, I think we should see a clear tendency to bigger ships. To use the ship system efficiently and drive down CO2, and you mentioned the investment into big ships and maybe pushing out all the inefficient smaller ships. Also here there will be a trend in that direction.
Very good. Thank you.
Thanks, Deepak, for your question. I hope also to see you again soon in a couple of minutes. We have another question coming in via the chat from Christian Cohrs, Warburg Research. I'd like to read that out here on stage. The Clydebank Declaration issued at the most recent COP26 and backed by 20 countries, including Germany, strives for green shipping corridors already by the middle of the decade. What is your stance on these initiatives? Do you think this is at all achievable, Rolf?
We talk about the mid of this decade?
Mid of this decade.
I think it's a good ambition. I'm trying to be, you know, I try to be a little bit realistic with these things. I mean, theoretically, it would be possible if you look at very small and short stretches that can run on alternative fuels, these days. If you look at longer stretches, the technology and the fuels are simply not there, yeah. I personally think that rather than trying to put everything out to try and create one very small green corridor, if you want, that it's probably better to push even harder on efficiency over the next five or ten years because that can reduce the absolute emissions a lot more, yeah.
In parallel, try to benefit from further technological development rather than forcing something based on a fairly immature technology as we have at this point in time for some very small corridors.
Mm-hmm. I got it.
Of course, that's, you know, that's just my opinion. I mean, I appreciate that people come up with those type of statements, and they help us all push in the right direction. I just think that when you look at 2025, for example, as an objective, that means that the ships need to be ordered today.
Yeah. Okay. All right. Very good. I think this was the last question for the first session. I think it's a good time to have a short break, about 10 minutes, I would say. We'll see you all 11:10 German time, and then we'll talk you through the initiatives that we have taken and the review that we have taken on the strategy, and we'll finish that off with also with our targets, what does that mean for our financials and non-financial targets? You also have the opportunity to raise your questions again. Thank you very much for now and see you in a bit. Welcome back, everyone.
After we heard a lot about our new sustainability strategy, Rolf Habben Jansen will now elaborate about the outcome of our strategy review, the conclusions that we have drawn, and how we exactly gonna prepare for tomorrow. Finally, both Rolf and Mark will present what it actually means for financial and non-financial targets. Before handing it over to Rolf, I would kindly remind you how to raise questions. Please use the hand raise function in Zoom. There's also the opportunity to use the chat, but again, of course, we would like to see you here on screen. Rolf, the floor is yours.
Thank you very much, Heiko. Thanks, everybody, again for joining us also for part two, where, you know, we would like to talk to you a little bit about the conclusions of our interim strategy review, which we indeed labeled Prepare for Tomorrow. We do believe that, you know, this five-year strategy consists in a way out of two sprints. One was the first three years, where, as we said, in the first part of the presentation, we already achieved quite a number of our targets. Now we just need to double down on some of the things and also start preparing for probably what's gonna be the next strategy, which is gonna be more towards 2030. Maybe following on what we said in the first section.
Initially we had three targets for us, which was be profitable across the cycle, maintain that global market share of around 10%, become number one for quality. We added one thing to it, which is this thing on sustainability, where Mark alluded on to what our strategy is and what we intend to do. We do believe that when we look ahead, not only for our Strategy 2023, so for the next roughly two years, but also for the time beyond that sustainability will remain a very core component of our strategy going forward. Having said that, as I mentioned also in the introduction, in the last two years, the world has changed.
We have been facing the pandemic, which had significant effects on consumer spend and also on the supply chains, which definitely have been disrupted. Even if, when you take a step back, I think shipping has remained fairly or pretty resilient because also in the crisis year 2020, we were able to transport the same amount of goods as we did in 2019, and in 2021, we have been able to lift quite a lot more containers than we did the year before, even if we have not been able to deliver all of them just yet. Digitization and innovation, I don't want to think about how we would've managed through the COVID-19 pandemic 20 or 25 years ago.
I think we just see how much digitization helps us, and we certainly still need to do more. Mark talked about sustainability and decarbonization. It is on top of our agenda today, and it will remain there. I think the other thing which we shouldn't forget, if we look at the last couple of years, is that we did not only achieve a lot of things that we set out to do when we sketched out our strategy, but also that our investment capacity, and also that of our competitors, is today very different from what it was some years ago simply because the industry goes through an up cycle.
If you look at how we intend to prepare for tomorrow, I think we've refined our priorities along three main pillars and we communicate them to you, I think, in pretty much the same way as we do towards our own organization. For us, it's very much around three main themes. The first one is simplify. I think what we've seen is that over the last years, our business has become increasingly complex. We just need to do an additional effort to simplify again our business model. If we look back at what we did on the last 10 years, I think we've been very successful twice in doing that on the back of the mergers with CSAV and with UASC.
Now we are several years beyond the last merger, and now we need to look ahead again and need to sort of reinvent ourselves, building on similar principles, though the only difference being that at this time we wouldn't merge with somebody else, but we would rather merge with ourselves and with the order book that we have. We should still keep those same type of principles in mind and reinvent ourselves a little bit, if you want. The second thing is we need to strengthen a couple of things. When we look back on what we did well and not so well and what we have achieved in our Strategy 2023, then there are some things where we've been very good.
There are also some which we have started, but where we need to double down over the upcoming two years to make sure that we push them across the finish line. Then finally, we have the ability and must also make sure that we do those investments that really make sense to also ensure that we remain competitive in the long run. Let me talk a little bit about all of those three levers that we are going to pursue. First and foremost is simplify. In our case, this is all about simplifying and improving the customer experience, yeah, and make sure that it becomes easier for us to do business, but also take out internal complexity and improve our cost position.
In the end, this is about four main themes, the first one being around the segments that we serve and the end-to-end customer experience. I'll go into depth in a minute. The second one is about network and fleet, yeah. The third one is around our network structure, which is both about the hubs that we have in our network, but also about the way that we do transshipment. The last one is more around the, let's say the unnecessary empty moves, but also about the depot structure. We do believe that there's quite a few things that we can still do in each and every one of those fields. Let me talk you through that in a little bit more detail for each one of these levers. Maybe starting with the customer experience.
A couple of things to be mentioned there, and quite a bit of that we've also learned over the last years. Maybe starting on the right-hand side of the slide. If you look at our service delivery model, then over the last years, we've done a lot of work to standardize and streamline processes and also leverage our global service centers, but also create quality service centers which are much closer to the market, but where we still create bigger units with larger teams because that gives more stable and more consistent quality, which is also what we have seen when we look today at how we deliver on our quality promises. We will continue to pursue that strategy, as we do believe that will help us to become better. We talk about automation. Automation is incredibly important.
We've done a lot of that. We talked about Quick Quotes in the first section, but certainly also when it is around the way we produce documents, the way we interact with our customers, the number of transactions that goes in an automated manner. That can still be pushed up further. We have a number of projects running on that area. We are also delivering innovations every month or every couple of months, and we need to just do even more of that, as our vision must be that the share of our online business continues to increase, but also that a very significant chunk of the services that we provide can be done by the customers themselves or can be automated. Same goes for customer journeys.
Not every customer is the same, and we need to be more tailor-made to make sure that we fit the needs of various customer groups, which then also brings us to the point about customer segmentation. I think we have refined our customer segmentation quite a bit over the last years and which is around how we serve our large NVOs, how we serve our large BCOs, how we develop some specialization in certain industry segments, and how we also make sure that we have specialized teams working on things like dangerous goods, like reefer, like special cargo. I think what we've seen in that process is that we can probably simplify that even further.
Right now we are working on that segmentation, and I do believe that, you know, when we meet the next time, we'll be able to explain that also to you in detail. But in the end, we will probably be serving fewer segments, but we'll try to do that in a more targeted way and try to avoid those channels that are fairly inefficient that today cause a lot of workload, especially for our customer service teams. When we look at network and fleet, this is all about complexity. Today, we operate between 125 and 130 services around the globe. We do that with about 250 ships on a daily basis. When you look at what is required when we...
In the future we believe, and that ties into the logic that I also mentioned when talking about the mergers that we did in the past. We need to look for ways to simplify that service network, and in essence, that means offer maybe slightly fewer services but deploy bigger ships. The two big benefits or the three big benefits that has is, first of all, it will help us to reduce slot costs significantly. I would say that on a five-year horizon, we're still looking at a double-digit % there.
The second thing is that it will improve quality because it drives out complexity from the network, which means that it's going to be easier to manage, and in the end, that will improve things like schedule reliability and on-time delivery of the boxes that we carry for our customers. The third one being, of course, emissions. Because as we replace older tonnage with newer, bigger tonnage, we will see a pretty significant reduction in the amount of fuel that we need, and thus also in the emissions that we cause. As we said also in the section on sustainability, becoming more sustainable is, in the long run, about fuels, but in the short run, it is certainly also about efficiency. A bit tied to that, the point on hubs and transshipment.
If we look at our network today, we transship cargo in quite a few places. I think in reality, transshipment, which is about more than 40% of the boxes that we move, is being transshipped at least once. Today, we handle those transshipments in quite a few hub ports, probably around about 25. We also see that when you have to transship a box, that basically increases the complexity. If you can reduce that complexity, that will improve the quality of the service that we provide to our customers. Our vision is that when you look 3 or 5 years out, that maybe roughly 90% of our transshipment is being carried out in, say, 12 or maybe 15 hubs around the globe.
That will allow us to offer better quality because those hubs will be better connected, the feeder connections will be more frequent, and that will lead to better quality and lower cost. If we look at the transshipment share in and of itself, today it's, as I said, about 40%. Personally, I believe that we should be able to bring that down to hopefully low 30s or something like that. Because between the services that we have and whether in the end that's gonna be 125 or 95 in some years or somewhere around 100, we will still have so many direct port connections that it must be possible to attract 70% of the cargo directly between an origin and destination port.
The other point to mention here before I get to strategy is imbalances and depots. This is very much around our depot network. I think it's fair to say that during the two mergers that we did, we focused a lot on process, organization, IT, network, container fleets. We probably didn't focus all that much on our depot network. As a consequence of that, we today have a very dense depot network. If you look at that also causes quite a lot of moves between depots, and it also causes some fixed costs and also means that we have slightly higher inventory of boxes than we would probably like.
We think that right now the time is right to have a look at that depot network and see how we can reduce the number of depots with probably somewhere between 30%-50%. That will drive our fixed costs, will allow us to work with lower inventory, and it will reduce complexity as well. We did a first pilot here in Central Europe, and actually there it turned out that coming to that reduction of 30%-50% is possible, and it does actually lead to lower cost. We probably also believe that there's also going to be some hidden benefits that are gonna come out of that, but those are not very tangible just yet. If we come to strengthen, what are the things where we still have to do more?
I think the first one is, you know, the way we interact and the way we work with our customers here. It's called revenue management, but it's also about making sure that our customers have access to all the products that we can offer. And it's very much tied to renewing the way we do our quotations, the way we do our booking processes and make them more seamless. It is about delivering operational quality. We have a large project which we call DOQ, where I believe we have identified those measures that we need to take to consistently improve schedule reliability.
Now, that has admittedly become a little bit less in focus over the last year and a half as we were battling the operational crisis, but we need to pick that work up again and make sure that it gets completed. We need to accelerate digitization and innovation. That also means we need to invest more in IT, and we need to find ways to double down on IT and be it through partnerships or through other means, further boost our innovation capacity, which we probably have doubled over the last couple of years, but we may need to do that again over the upcoming three, four, five years. We'll continue to grow in attractive markets. I think that strategy has served us well. I think inland we've not been that successful. We have been growing a bit.
If anything, I would say that's probably the area in our Strategy 2023 where we have not really cracked the code just yet. Yes, we have seen some growth there, but not in the order of magnitude that we were looking at. Then sustainability was already covered before. Let me talk a little bit about some of these things that we need to do towards the customer. One, the first one I already mentioned, which is all about improve the quality towards the customer and the user experience, especially around the quotation, booking, tracking, payment process.
Key there in our case is what we call the quotation and booking engine, which is being developed as we speak, and where we also follow much more modern way of developing that than we would have done in the past, where we might have defined a project that would then be delivered in 3-5 years. Now we define it in 90-day heartbeats, where every quarter we try to bring tangible improvements and that also add value to the customer. When we look at operational quality, I think our objective that we set ourselves in 2018 was to consistently stay within the top third of the industry when it's around schedule reliability.
Even if you can't see it today because the overall schedule reliability has gone down so much, we have actually made some headway in that because when you look at the Sea-Intelligence statistics, for example, then today we are in the top third, yeah, and we have been there over the last 7-8 months. Whereas if you go 3 years back, we were in the bottom third. Some of the measures that we've taken are definitely working, but we also believe that we can still do more, yeah. When we look at IT, I already mentioned it, this is about completing the transition from our phase II platform to phase III , but it's also about just creating more innovation capacity, working more with partners, and making sure that that digital experience of the customer becomes better and better.
When I jump to attractive markets, I think that's an area where we're quite pleased with the progress that we've made over the last years. It's not mentioned that much in this presentation, but I would still point out the reefer segment one more time. We've invested in that to renew and grow our fleet of reefer boxes. But I'd also say that that's an area where we have consistently been growing in low double-digit % since 2018. When we look at that market, we believe that market will continue to grow, and that also means that we will continue to have an opportunity to take a little bit of share there or at least benefit from the growth that's in that market.
When we look at India, that's a market where Hapag-Lloyd has traditionally been strong, particularly on the western side of India. Of course, that market is growing very fast. Our expectation is that when you look in the next 5 or even 10 years, that these are markets that that market will continue to grow, both towards Europe but also towards the U.S., which are both important markets. In addition to that, we do build out also our position in markets where we have traditionally been strong, be that a market like Italy or be it Germany or be it Canada or Mexico. There we just need to maintain our position. Africa was mentioned already several times. Good progress there.
If we look at the size that we have there today and you compare that with five years ago, I think we are roughly 4x the size that we were five years ago. We probably won't be 4x the size that we are today in five years from today. I do believe that the target that we set ourselves at that time is to carry around 1 million TEUs in 2023 or 2024 is probably within reach, which I would consider to be quite a good achievement. I mentioned to you the point on inland a little bit earlier. I think we need to step up our efforts there. Somehow it's not that easy for an ocean carrier to be a really good door-to-door carrier. We do it quite well in some trades.
I mean, if we look at the Atlantic trade, for example, the share of our door-to-door business is really high. Also on the Transpacific, we do a fair bit of it, and also in places like Canada and Mexico, we are strong. Rolling that out to other markets is not uncomplicated, and I do believe that there we have to still look a little bit in the mirror and in a couple of cases probably take a little step back. Because in the end, it's not about trying to force your customer to do also the inland with you. No, it's about offering him or her a good service which they are willing to buy and for which they are willing to pay a premium. I think that's where we still have a little bit of work to do.
We have real good products in some segments and in some markets, but not yet consistently everywhere around the globe. That will also mean that we may have to do some investments here or there to strengthen our capabilities in that field. I mean, some of that you see here drawn on the picture. Yeah. Our ability to currently do live tracking and do easy issue resolution is probably not as good as it could be. Also, when we look at some of the value-added services that our people are looking for, we probably can extend the services that we offer still a bit, especially on the digital channel. That brings me to the last point.
Apart from simplifying our business, strengthening certain things, and doubling down on some of the things that we have already been working on, we also have the ability today, and I think also the obligation, to safeguard our long-term investment competitiveness by doing investments in those areas where it is needed. I would say that for us, those are four main categories. First and foremost, our people and also their capabilities. Also for our people, the way they have to work and the market in which we operate has changed dramatically over the last couple of years. Not only because of COVID and not only because of working more mobile and from home and using different tools, but also because the whole industry has simply changed.
If you look at the tools we have today and the amount of cargo that, for instance, goes via the online channel, that's very different from what it was before. That means that we need to help our people adapt to those new ways of working, but also to new jobs. Because the jobs that we have today and the jobs that we'll have tomorrow will not necessarily be exactly the same ones that we had yesterday and that we have today. That's a key area where we need to invest and need to make sure that everybody understands that this is actually quite an interesting industry to work in. I think shipping today suffers a little bit from a not-so-good image, whereas there are many things that are actually quite attractive. There's a lot of innovation going on.
It's a very global, very international business, where you have exposure to many people and many cultures. It's also one that, on the sustainability side, can really make a difference going forward. That's, I think, for us, probably one of the most critical aspects, even if in absolute terms, the amount that we have to invest is probably manageable, but it's one where we have to do more. It's about ships, not only more efficient ones, but certainly also more eco-friendly ones. It's about equipment. Then in terms of M&A, there's probably some that we will do, but we will not be very aggressive there. Also, because right now some of the prices that are being asked for companies are simply pretty crazy. A little bit more detail on some of that before we wrap it up.
On people, we've already said invest in large-scale capability building, whether that in the end will be around a Hapag-Lloyd Academy or something like that, we'll still need to work that out. It's also about redoing our offices and making sure that our people get the new tools and get adjusted to a different way of working than they were pre-pandemic. We summarize that by bricks, which means redoing some of the offices. It's about bites, making sure everybody has the right tools, but it's also about behavior, because our people will need to lead in a different way post-pandemic, as they have done pre-pandemic. We talked about ships. In the end, if we want to become more efficient, we will need newer and more modern ships. They also will need to be more eco-friendly. That means looking at dual fuel options.
I mean, it's the 12th that Mark referred to earlier, which are dual fuel LNG. One could also imagine dual fuel ammonia or dual fuel methanol type of ships going forward. We will probably do some retrofits, but again, as we said before, over the next 5 to 10 years, we also need to simply work on efficiency and make sure that the absolute amount of fuel that we need becomes less, and that the average size of the ships that we deploy goes up, because that ties into what I told earlier around the network. When we look at equipment, I think the container was a very important and impressive invention, 50 years ago. If you look today at a container, compared to what it was 50 years ago, it really hasn't changed all that much. Yeah.
I don't think that the size of the containers will change, but I would still say that if I fast forward three or five years, I would still expect that not only our reefer boxes, but also our dry boxes, will be equipped with some kind of IoT device. I'd also say that coming back to the sustainability angle, that one really has to ask the question whether over time, we need to use as much wood as we do today to operate the containers or whether we should go more and more as we have already also been piloting to steel floor containers, which is certainly quite a bit more sustainable. A bit about M&A. That question we get a lot.
I think when we look at M&A, we've always said, you know, we'd only do selective M&A in the end to try and strengthen our core business. That's still, I think, our focus today. When you look today at where we are willing to invest, apart from things like IT, apart from things like maybe a Hapag-Lloyd Academy, we would still be looking predominantly on the liner front, you know, where there may still be one or the other smaller opportunity out there. I think Netherlands is really a good example there, which helps us address a market which we were not covering yet. And I don't...
There may not be that much in the short run, but if I look out 3, 4 or 5 years, I'm sure that one or the other opportunity will still come up as the consolidation in this industry is maybe largely behind us. When the markets return back to normal, we will still see that there's gonna be a material difference in operating costs between the large carriers and the smaller regional ones. Also with digitization moving ahead, and as such, the ability to differentiate based on other factors will be less. I do think we'll see a little bit of further consolidation. Then when it's around terminals and infrastructure, I told you, I said earlier, I spoke earlier about the hubs and the importance of access to what we would call core markets.
I would say that that's an area where we would certainly be looking at that if and when that fits into our overall portfolio and network, we would not hesitate to consider equity investments in infrastructure. Again, to serve our core business. If you would see some of that, you'd probably see it around some of the places where we have hubs or around some of the markets that we consider our core markets or strongholds going forward. There is always this point on complementary services where we certainly won't rule out that we will do one or the other thing.
I would say though that contrary to what some of our competitors do, you should not expect us to make a big move into forwarding or warehousing, as we still believe that that's a different type of market. If we look at what our business model is and what has served us well over time, then we'd like to stay relatively close to the core. I mean, that's also illustrated by, I think, the recent things which we have done. You will all have seen the investment that we made in the Altenwerder port, where we took on 30% in the only real deep sea port that there is in the North Continent in Germany.
We believe that over time, that will serve us well and will be an important terminal in our overall network. We did an investment in Tangier, as many of you will know, where we invested and took a share in TC3. For us, Tangier, a very important hub for everything that comes out of Asia, and in a way, is our West Med hub from where you can go to the U.S., you can go to Africa, or you can go into the Med, or you can go to North Continent.
I think it's a good example of one of those hubs in our network where we will probably do quite a lot of transshipment, even more than we do today, and where we try to make sure that all the boxes indeed meet their connections. If they miss the first ship, that they then can be carried on a second ship that maybe comes only one or two days later. Now, Dutch, I already mentioned, for me, a great example of a niche acquisition that we can do. If more of that pops up, we will certainly look at that. Let me try and wrap it up and come closer to the Q&A session, as I'm sure there will still be some questions.
Wrapping it up, very briefly, if we look at the next two years, for us, the key words will be simplify our business model, strengthen and double down on some of the initiatives where we haven't achieved yet what we set ourselves out to do until 2023, and then make sure that we complement that with doing those investments that are needed to also ensure our mid and long-term competitiveness as we prepare to write our next vision towards 2030. Our targets have not changed, yeah. We need to be profitable across the cycle, not only in an upcycle as we know it today, but also when the markets are a bit more difficult. We want to maintain our global market share of around 10%.
We want to become the number one for quality, and we need to accelerate our efforts on sustainability, which then brings me to our financial targets. I think, Mark, it would be great if you could talk a little bit to that.
Yeah. Thank you. Thank you, Rolf. I think on our financial targets, it's clear our long-term financial targets remain valid. Throughout the cycle, we want to earn our cost of capital for sure. Net leverage we would keep on or below 3, and we want to constantly strengthen our resilience. Liquidity should be enough all the time. A sustainable liquidity reserve is important. Also, on the basis of a strong balance sheet, have an equity ratio above 45%.
Keeping our shareholders in the game for sure and contributing to that and let them participate on the development and on the profit we are making. Having a dividend policy and paying out at least above 30% of EAT and important for the topics of today securing sustainable investments into our fleet, into our assets, it's quite important. We are above all of these targets right now for sure, but longer term through the whole cycle, they absolutely remain valid.
I'd agree to that, Mark, but I would say though that of course it's good to be conservative also from your role. I would say though that if we look ahead over the upcoming couple of years, that in on some of these, we definitely could be a little bit more ambitious.
I was afraid of that, but ambition is high.
I think short-term ambition will also be and has to be higher. I would also say though that I agree that when you look at it in the long run, if we are able to achieve a profitability which is always ahead of our weighted average cost of capital, that's actually quite good, because the industry has not been able to do that for a very long time. I also believe a leverage, as we've said, maybe a little lower than what we have in here. In the long run it's good. Liquidity remains important, and so are the other ones. So I think, yes, they remain valid.
I just think that for ourselves, but I know we do that also, we are a bit more ambitious, of course, short term. If we look at the non-financial targets for a minute just before we get to Q&A. I'd say that there we have probably upped our objective a little bit. I think, first of all, when it's around quality, we measure that very much around, you know, what is our Net Promoter Score. Even if it's difficult to measure ourselves there against other shipping lines because those data are not public, I think our ambition must be to be best in class.
We are also taking additional measures to stimulate also our organization and reward our people if we indeed achieve that. Schedule reliability, I think very clear. We need to remain in that top third. The CO2 reduction, Mark, you already talked about it until. Yeah. The AER needs to come down with the 30% that we indicated until 2030. On the land side, we are not there today, but our ambition remains to get to that 40%. I personally don't think we'll be able to achieve that by 2023, but we will certainly then carry that over into our next planning cycle.
Finally, when we look at attractive markets, there we'd like to have, in those markets, that we target over time a market share that is at least equal, yeah, if not a little bit higher than what we have on a global basis. That brings us, I guess, to our way forward, and then I'll hand it back over to Heiko. It's about refining those initiatives that we already have and cluster them around this simplify, strengthen, and invest. With that, we continue to implement our Strategy 2023. As I alluded to a little bit earlier, we also slowly start thinking beyond that as we need to start building a vision towards 2030, which realistically we will complete somewhere in the course of the first half of 2023.
With that, Heiko, I guess we come again to Q&A. I happily hand it over back to you.
We do. Thank you very much, Rolf. Thank you very much, Mark. Again, in case you wanna raise your question, please use the hand raise or chat function. Before I hand it over to your question, I just have a question myself. Rolf, you mentioned throughout your presentation a couple of times that the pandemic has even accelerated the pace of digitization in our industry, but certainly also in other industries as well. Some others are far advanced, I have to admit. Some other industries still and continue to rely on personal interaction. From your perspective, how do you think where stands the shipping as of today in terms of digitization, and how may the interaction we have with our customers change over the upcoming, let's say, 10 years or so?
I think the shipping industry has made, you know, quite some progress over the last years, yeah. I think we tend to sell ourselves a little bit short on that. As I said earlier, I mean, the fact that we have been able to continue producing roughly the same amount of cargo and transporting the same amount of cargo throughout the pandemic year as we were before that, with all the limitations that were there and with pretty much everybody having to work from home most of the time, I think that's pretty impressive. The way that we were able to shift from the office to work from home without too many glitches, yeah, in a very short period of time illustrates that we can do a lot.
The fact that we sell 25% of our business online today compared to pretty much nothing in 2018 tells a story as well. I think that this will continue at very fast pace. Yes, there are some industries that are probably a little bit more advanced. On the other hand, if I also see how we do also things like we do this today and how we do our ATM and how we do town halls and all those type of things. These things have developed a lot, and if I look at the pace at which we are developing new IT tools today compared to what it was, say, five years ago, I think, you know, I don't think we have to shy away from other industries.
I think we're selling sometimes ourselves short. That comes to the point that I made earlier. If you look at the people that work in shipping, I think sometimes our ability to attract new talent is not yet as good as it should be, but that's also because we are not so good in really, you know, painting that picture that shipping is actually a very interesting industry. Innovation is growing fast, a lot faster than it has over quite a few decades. It remains a very international and global industry. If you look at where can you really give a contribution to making a better environment and making the world a better place, I think shipping is also one way you can make a difference.
I agree. Thank you very much. Mark, not only Rolf, but you also mentioned earlier today that the pandemic and the related supply chain disruptions clearly resulted in rising unit costs after many years of cost reductions and so on. While some of those cost inflations might stay, others might disappear. From your perspective, do you think we will come back to a cost situation that we have seen before the pandemic, or do you think that some of the costs will remain and might be irreversible?
Yeah. Due to these operational challenges we are seeing right now, we have strong cost increases which are closely tied to that. If these operational challenges, as we all hope, are reducing or will reduce over time over the course of 2022 and 2023, big part of that will these costs will fade away and go away. Because if you don't need as much storage and handling and haulage initiatives or actions, costs will go down. I think we have to acknowledge that maybe up to a quarter of the cost increases entail the risk of getting stuck in the system, and they have to be addressed. That's what we have done with our strategic cost program where we address these costs, that we are able to reduce them after that phase we are in right now.
On top of that, address costs we would like to reduce over time, and as we said it, we want to invest in that cost base. Investing into new systems, new structures to become more efficient, more competitive, and working from a better cost base. That's a little bit the perspective we are having on that.
Right. Pretty clear. Thank you very much, Mark. Right, we have already a couple of questions coming in. The first ones are coming from the line of Carolina Dores, Morgan Stanley. Carolina, please go ahead.
Okay. Hi. Good morning, everyone.
Hi.
Thanks for taking my questions. I guess I understand the broad range long-term targets, but given that you started having more long-term contracts, I would imagine that you have some view of 2022 and 2023. If you could give us an idea of the split of CapEx versus dividends to shareholders you're aiming to distribute or at least a range, that would be quite helpful 'cause you're very far, if I look at processes, actually it's not even mine, which are just very similar as well. You're very far from any sort of leverage for the next few years.
Yeah. Maybe I kick it off. You're right. The situation we are in right now has the potential to do a couple of things in parallel. First of all, I think we addressed it today, both on sustainability, but also and as important, invest into our operations and the potential is absolutely there. That's one hand. Secondly, yes, for sure, let shareholders participate on that excellent development is also very true, and we will for sure do that in a sense.
Balancing that is possible, even keeping our financial targets as we set. Therefore we will in parallel do that and invest into our assets, invest into sustainability, into competitiveness, but also let shareholders participate in that to keep our targets. On top of that, we will even be more resilient and more competitive, but even doing more as we speak.
Maybe Mark, if you wanna be a little bit less cryptic, yeah? Yeah. I think, you know, what we will do is that we will firm up our plans also in terms of CapEx over the upcoming quarter or so, yeah. I mean, we are going through that process as we speak. We know that there are quite a few things that we need to do on the fleet. We know that there's a considerable amount of money that's needed in sustainability and other parts. I also agree with you that, you know, that will still mean that we will not immediately go back to leverage levels that we have seen before. For that reason, I think you should
It's not unlikely that you will see a somewhat higher than usual payout of dividend in the upcoming one or two years. That would also be fair in my view, because if you look back on the last 10 years, there have been many years where we didn't pay anything to our shareholders. Then in the last couple of years, we've been able to pay some. But our shareholders have supported us very well throughout the crisis. They've participated in many capital increases and from when that was needed to either, you know, strengthen our balance sheet or to make mergers possible. I do think that, you know, right now, looking at where we are, we will certainly take that into account.
Thank you.
All right. Thank you. Thank you, Carolina. We have a couple of additional questions. There is a question also coming via the chat, how does your inland, and that's, I think, certainly something for you, Rolf: how does your inland capability strategy compare to Maersk integrated strategy? Are you trying to follow that suit, or, where do you differ actually, in terms of that inland piece?
I think our strategy is different from Maersk. I mean, Maersk is really saying, you know, we want to be that integrator. I think if I look at the investments that they have done, they've done quite a lot of investments in fulfillment, in warehousing. I just read this morning that they said they're gonna double down on the investments in warehousing in Europe. I think that's a category, you know, where we do not intend to go into. Having said that, we have traditionally, probably even more than most, been very much a door-to-door carrier, especially on trades like the Pacific and the Atlantic. We will continue to offer that services.
That doesn't mean that we necessarily want to become an integrator, but we want to be a carrier that is able to offer you a seamless service from the moment you book until you get your goods delivered at your door.
Yeah. All right. Clear. We have another question coming in from the line of Sam Bland from JP Morgan. Sam, please go ahead.
Yeah. Hi there. I hope you can hear and see me.
We can see you.
I have one question with two parts. Where you're aiming for ROIC above WACC, is that a sort of through cycle average, or should we expect that even in the kind of trough year for profitability, ROIC should exceed WACC? Sort of the second part of that is, I guess, as a container shipping operator, you're somewhat reliant on the rationality of competitors. How do you feel about kind of setting that sort of financial target given that not all of your future profitability is in your control? Thank you.
Well, I think in principle, we've always said it's through-cycle return on invested capital. Of course, you would somehow need to correct it for the extraordinary returns that we see this year, because otherwise you would already be there for the next five years, which also doesn't make any sense. I think that's why we said on the short end, we need to be a little bit more aggressive. We'd like to think, though, that we can also build a business model that does not allow us or, you know, that won't lead us to drop back to zero or very close to that when there is a down cycle.
Also, if you look back over the last 10 years, you will have seen that especially since we merged with CSAV and later on UASC, that our margins have been more stable than that of some of our competitors, yeah, who are much more floating with where freight rates are on some of the dominant trades. As you see, for example, right now, a number of the Asians, yeah, being very profitable on the back of a very strong trans-Pacific trade, yeah. That's, I guess, the point on ROIC, yeah, where I think, in fairness, across the cycle must be the objective. In terms of the influence of our competitors on that, yes, you operate in a market where there is competition.
We also know that our business is cyclical, you know, that will not change, yeah. I think just that our objective is very much to try and, you know, work in such a way, that's why we say we need to be competitive in 3-5 years' time. We need to make sure that we then have the right cost base. Because we do believe that the market will normalize at some point, and then we won't like to be in a situation where all of a sudden we drop back into negative territory or an extremely low, yeah, return on invested capital, yeah. Across the cycle, above the WACC, yeah, which is also something that the industry has not done for the last 15 years, if you look at pre-2020, so that's certainly ambitious.
Make sure that when, due to cyclical developments or due to actions from our competitors, if we get into a trough, we should still be, yeah, significantly positive.
Thank you.
All right. Thank you very much. Sam, any follow-up question? Oh, he's gone already.
No, no, that's fine. Thank you.
All right. Thanks a lot. There are a couple of other questions coming in. I've just heard that the line of Neil Glynn from Credit Suisse is not open yet. Could you just confirm that for me? All right. All right. We have Sathish from Citi again. Sathish, I hope that your line is open now. Yeah, we can see you, and hopefully we can hear you. Please go ahead.
Yeah. Thanks, Heiko. Yeah, I can hear you clearly. Yeah, thank you. I actually have three questions. Let's firstly on the consolidation, right? You made it very clear that you're not looking for big opportunities in the near term. You want to focus more on the core of shipping. Where do you see yourself in terms of volume exposure split between contract and spot normalized? That's mainly for A.P. Moller at the group level. Do you see in, like, say, where Maersk has gone towards more like 67%-70% on some trade lanes. Do you expect a similar uplift? Or given the focus on core of shipping, you still want to keep some more on spot. Then the second one around the digitalization, actually.
Given how the technology investments have gone into the industry in the last say, well, I would say like in the last 4 years, actually, where do you see potential in terms of, say, how quickly you can react to a demand slowdown or a shock? That's point one. Also the other one is the blank sailing has actually gone up significantly in the last 12-18 months. It's like now 6%. If you compare on the previous cycle, it is more like 1%-2%. I believe this is partly also has to do with the better data that you have, which means that you are able to optimize your capacity according to the schedule reliability and so on. If you could actually give some color on that, again, that would be helpful.
Third one is specific to the cost. Given the cash that you're going to generate and the CapEx program, would you see there's a benefit path if you are increasing your own exposure of own versus lease split on both equipment and vessels? Would see potential to drive down the unit cost by increasing that exposure to unit owned assets.
Well, let me try and wrap them up from the back and hopefully I won't forget any. As you put a couple of ABC questions in between. I think when it's first about our vessels. I mean, our fleet, we are 65-plus% owned fleet today. We think that's a healthy number. You know, over time, you don't want to have only own capacity because that also reduces your flexibility. Also the last 18 months, we've seen that you certainly need some of that. Having said that, we certainly don't want to drive it down a lot because I agree with you that certainly in today's charter market, you know, that does not make any sense.
That I think to unit cost and own fleet, it also will still come from modernizing the fleet. I think you posed a question on contracts and you know, where do we think that what's our share of contract rates? Yeah, our contract, the share of contract cargo in our overall portfolio is definitely also going up a bit. We're probably not reaching the levels that that Maersk has indicated. But I would say that also in our case, contract cargo is probably gonna be above 50% next year, and also a fair percentage of that will be multi-year contracts. You asked a question on blank sailings.
I'd say though that you know I genuinely believe that the notion of blank sailings is a little bit misleading at this stage. Because what we in essence see is that we don't blank sailings. Blank sailings sends a signal that you do it you know on purpose. We don't take out any sailing on purpose today. We don't blank anything. What we see is that sailings slide because we face so much congestion in many ports around the world that the ships simply don't get back on time. That means that if you want to have a weekly service from Asia to Europe for example you know you wouldn't need 12 ships in a loop but to do the same service you would need 14 or 15.
We sometimes simply don't have those ships, and that means that you get stuck with open positions because instead of 12 we can maybe deploy 14, but if we would have needed 15, we still have an open position. I don't think that that's really a blank sailing in the traditional sense, if you want. It's more of a slide sailing because the ships don't get back on time. I think those are probably the key questions that you posed, yeah.
Can I just a couple of follow-up. One first on the cost side. So what is your split on the equipment side in terms of own versus lease? Is it still around 65 on-
Yeah, we're about 65 on the ships, and we're a little bit below 60 on the equipment.
Sorry, go ahead.
Yeah. In terms of, you know, there's a big difference in the way you look at boxes and the way you look at ships. Because when you look at ships, then your own vessels tend to be the ones that you commit for a long time, and then the charter fleet tends to be short term because that's where you want to have your flexibility. Now that's a little bit different because you have to make longer commitment, but normally that's how it works on the ship side. Whereas on the container side, also many of the leasing obligations that we have tend to be long term. Because you only replace boxes every 15 or 16 years, the effect that you have actually on your daily operating cost is not so huge as it is actually on the ship side.
The share is significantly less relevant, yeah, than it is on the ship side.
If I had to think about the unit cost, potential to reduce going forward, right, where is it going to come from actually? If you look at, say, terminal vessel and bunker probably accounts about 50%-55% of your costs. The other elements that are left are equipment and intermodal.
Saving needs to come from. I mean, there's something on productivity for sure and automation, that will be something. I think that when we simplify our network, we will also be able to reduce some of the, what we would call other terminal costs, transshipment costs, empty inland moves, those type of things. Of course, a big chunk needs to come from the ship system. Whereas we said, you know, we intend to grow roughly with the market. If I would fast-forward 5 years then, you know, our capacity could be 20% bigger than what it is today, but we probably still operate around 250 ships. By doing that, you simply deploy ships that are on average 20% or 25% bigger than where they are today, and they're probably also younger.
That will result, yeah, in lower cost. Because that's also the segment where you will be less exposed to the short-term charter market. To the point that Mark made earlier, we will probably deploy fewer small ships and somewhat bigger ships on average, and that's in the end what's gonna make the difference.
Okay. Got it. Yeah. Thank you.
Very good. Thank you, Satish. Next questions are coming from the line of Andy Chu, Deutsche Bank. Andy, please go ahead.
Thanks very much, Heiko. Three questions from me. One around strategy, the execution's been, you know, excellent. Just around the sort of forward-looking comments and not wanting to explore maybe different modes such as air forwarding that some of your competitors have. Just wondered why you didn't want to sort of potentially offer a bit more sort of flexibility with having some, even if it's small, amount of potential air forwarding.
Yeah.
Secondly, in terms of the inland component, the target of 40%, and apologies if I missed it, but where are you today on that against that target? Then the last question is around sort of global supply chains and I guess the sort of just-in-time stocking model that's kind of fallen over with COVID. I just wondered whether you think, Rolf, that that sort of just-in-time stocking model is kind of maybe not quite dead, but it's kind of needs to be seriously reevaluated as we go forward. Thank you.
Yeah. Maybe rolling them up from the back. I agree with you that I think certainly in some commodities, people will hold a bit more inventory going forward. I would anyway, yeah, recommend that to people, but that's been a discussion that's a little bit older. Certainly with today's also very low cost of capital, I really don't think that should be such a huge problem. That will also support demand over the upcoming 1 or 2 years, I'm sure, yeah, 'cause inventory levels today are very, very low. Your question was on inland. If I, the second one, today we are a little bit north of 30%, yeah. And the target is to get to 40, which is actually quite a steep increase.
I have to admit that I did not fully understand your first question acoustically well, but I believe that you asked why we are not doing a little bit more in extra type of services beyond, let's say, the core liner business. I would still say that, you know, for me, as I said, I wouldn't rule out that we'll do a little bit more. Certainly when you look at our online channels, we already today offer stuff like customs clearance, and we offer stuff like in insurance, we offer inland. We offer a fairly broad range of services already today. We'd like to see those growing. Then if we look at what comes out of those extra services in terms of revenue, that is a lot more today than it was some years ago.
I was more focusing on stuff like CMA and Maersk are doing, saying, "Do we want to go into air freight?" Personally, I don't think so. Yeah. Do we want to go into warehousing? I think that's a very different type of activity. If you want to do that requires also very significant investment in terms of infrastructure, systems, management capabilities. I think that's very different. I mean, I was responsible for contract logistics at DHL and Danske 15 years ago. That's a very different business than shipping. So if you wanna run that, you need to be prepared to also make the organizational investments that are needed to do that. Then the last point where we've said we're probably not gonna do that is go into forwarding.
I think one of the essential value propositions of forwarders remains that they can offer services from multiple shipping lines. If we would be a forwarder as Hapag-Lloyd, I still believe that that's not that easy. That's also, I believe, why Maersk and CMA take very different strategies on that. Because CMA does all of that through more of a portfolio investment in CEVA, which I can certainly see from a portfolio management perspective to make sense. When you look at Maersk, they try to become an integrator, but they also have then consciously made a decision, you know, to get rid of their forwarding activity, which, you know, at least on the ocean side, which you know, somehow makes sense. I don't think that their strategies are inconsistent with what our thinking is.
It's just that they make different choices in terms of where to allocate their money.
Thanks. Yeah, I was just more thinking about the air side and whether you would just test the market and just say that just gives your customers a little bit more flexibility. I mean, hopefully we don't have these situations that we faced over the last 18 months, but.
Maybe, but I mean.
A little bit of choice is a good idea.
Yeah. I mean, I'm not so sure that's a good idea. On the other hand, you could also do that by, you know, making sure that you make the work with our customers a little bit, yeah, more partnership-like. Let's not forget that more than half of our business is being generated through forwarders. They tend to have that. If they are the face to the customer, you know, they would be the ones who would, in my view, be the most logical ones to offer both ocean and air freight. Yeah.
All right. I hope that answers.
[uncertain].
Hope that answers your questions, Andy. Thanks for that. Kindly remind you to, if you wanna ask questions, just raise your hands and use the hand raise function of Zoom. We have also a couple of written questions received. There is actually a follow-up from Mark Sherlock from Stifel, and with regards to the inland business, and he's asking actually if a higher share in the inland business does that also mean that you wanna increase your BCO business in the inland? And does a higher share of BCO business imply also a larger share of long-term contracts? Long-term means one year or maybe even above that.
No, not necessarily. I think, I mean, the hypothesis also when we started looking into it was that we would do much more inland for BCOs than for NVOs. In reality, the difference is actually not that big. The thing though, where it does make sense and where I actually agree, is that sometimes it helps to close some longer-term contracts than usually with BCOs to build up certain lanes. Then you can, in essence, sell into that business. By doing that, you create more scale, and you also create a cost position that's not so easy to beat. I think, and that's also what we see, that when we build strong inland corridors, there is usually a backbone there with BCO cargo.
If you look at the overall scheme of things, then the split or the merchant or carrier haulage share, for example, between NVOs and BCOs is not that different.
All right. Very good. There's another question coming from Christian Cohrs, Warburg, and he's actually asking about the targets, the non-financial and sustainability targets, and are they meaningfully embedded into the variable management remuneration?
I would say that the answer to that is probably nein. You know, it's to some extent included in the schemes at this point, but I agree that we'll have to do more there also going forward. I think that will come. The question there is a little bit how much influence everyone can have on that. Because there are certainly groups and people in our organization that have a huge impact on that. I would also say, though, that you know, if you are producing bills of lading in our service center in India, your impact on that is actually somewhat modest.
Agreed.
That's why we probably take a more differentiated approach on that as we get lower down in the hierarchy. I mean, it's like with all of these things, if you have a certain ambition and if you have certain targets, then in the end, you need to make sure that you cascade those targets into the organization. It's just that on this one, we probably take a you know, a somewhat more focused approach where we say, for those people that can really influence it's important. For others, it's less important. Of course also for people like Mark and myself, sustainability will also be part of our incentive schemes.
All right. Thank you very much. There's another question coming from Christian Cohrs from Warburg, and he's asking about. I read it out because it's quite a long one. Given the importance of the Port of Hamburg and prospectively also the JadeWeserPort in Wilhelmshaven for your network, what are your thoughts on the potential cooperation or merger of the Eurogate and HHLA's German terminal operations? Do you think this is going to happen, and does it have any implications on Hapag-Lloyd?
The question when it's gonna happen, you should not ask me. I mean, I'm the wrong person to ask. I mean, I've been quite vocal in public that I think it would be a good thing.
Yeah.
If they work together, mainly because I believe that Bremen, Bremerhaven, Wilhelmshaven, and Hamburg each have their own strength, but they are not the same. If they would be working together, you know, they can play to their strength. They can leverage their strength, yeah, which are complementary and not the same, versus the ports in the west range, yeah, so Rotterdam, Antwerp. I think I would generally welcome that. Whether it's going to happen, I don't know. I mean, if I have to believe the latest reports in the press, then some progress is being made, and, you know, I would be happy with that. Yeah. Again, you know, whether that's gonna happen or not, then I'm not the right person to ask that question.
All right. Very good. We have a follow-up from Sam Bland, this time written and not on the screen. He's asking: What is your current view on whether the global fleet will need to slow steam more over the next, let's say, 5-10 years to meet the current or future environmental regulations? And could this have also meaningful impact on supply demand?
I think the impact of the new EEXI and CII rules that are gonna kick in as from 2023, and then gradually will be tightened, is not yet fully clear.
Yeah.
The final formulas have not been set, and some of the correction factors that are going to be agreed within the next couple of months are going to have a material impact on how serious the impact will be from those rules. Having said that, I do believe that particularly when it's around smaller and older vessels, it will have an impact, and it will mean that we have to derate engines and sometimes need to sail slower. Whether that will have a material effect on supply, we don't know for sure. I think, though, that we should not underestimate it. Especially because the rules on CII are going to be progressive, so every year it's going to be a couple of percentage points tighter.
I think the effect of it could actually be more significant than is the consensus at this point in time.
All right. Very good. Thank you very much to both of you. I think this was the last question that we have received. That's why we would like to finish it off here. Thank you also very much to all of you for your interest in Hapag-Lloyd and for your participation. Next time we hope to see you in person again and hope to have you here in Hamburg. Until then, we wish you all the best. Take care and goodbye.