In conversation with NYK Group Europe’s managing executive officer and vice chairman of the International Chamber of Shipping, Carl-Johan Hagman, Walenkiewicz discussed the friction between shipping’s historical efficiency and the “turbulent” reality of modern supply chains.
In an episode of DNV’s Market Views, Walenkiewicz noted that while the world requires low-emission transportation, the current climate of disrupted supply chains is forcing the industry into shorter-term inefficiencies, characterised by longer routes and more fuel burned.
Despite this Hagman defended the industry’s track record, arguing that shipping remains “hyper-efficient”, carrying between 80 and 90% of global trade while accounting for only about two and a half percent of CO2 emissions.
For Hagman, the industry’s progress is a “phenomenal job” of enabling global prosperity.
He pointed out that every year, technical and operational improvements yield another 10% in efficiency without even changing fuel types. On a tonne-mile basis, he estimated that the industry has achieved an “unprecedented” 50% reduction in emissions over the last decade or so.
Shipping “grossly underpriced”
However, this efficiency has come at a cost to the industry’s own bottom line. In the conversation, Hagman argued that transportation is currently “grossly underpriced for the value it provides and for the emissions it produces”, noting that much of the efficiency gains from scaling up vessels have been “given back to the global trading system” in the form of stagnant freight rates. This set the stage for a moral and regulatory dilemma: the industry has the technology to do better, but it lacks the unified global framework to implement it fairly.
Turning to the International Maritime Organisation, Hagman expressed deep concern over the potential erosion of the UN body’s authority, which he views as the “biggest challenge” the industry faces. He cited the 17th-century principles of Hugo de Groot’s Mare Liberum—the idea that the sea belongs to no one and is for the good of all—as the bedrock of the IMO’s success. Until very recently, the IMO operated on consensus, a “model for the rest of the world” where technical experts from across the political spectrum could solve global problems without the friction of national agendas.
But that era of “de-politicised” co-operation appears to be ending. Hagman pointed to last year’s MEPC 83 meeting as a “watershed moment” where the predictability that shipowners rely on began to crumble. This is particularly frustrating for an industry that, in a historic move, essentially asked to be regulated.
Hagman noted that as vice chairman of the ICS, he saw nearly 100% of the world’s shipowners’ associations voluntarily request a global tax on their operations to fund decarbonisation. This was a first for any international industry, yet the lack of a unified regulatory response since then has left the pathway to decarbonisation in jeopardy.
Without such regulation, Hagman fears that environmental issues will remain unaddressed because “there is a very limited propensity among end customers to actually pay for it”.
Walenkiewicz characterised this shift in international law as a move toward a “law of the jungle”, where “muscles are being flexed rather than dialogue happening”.
This “weaponisation” of fleets and trade routes introduces massive inefficiencies into the system, he said.
Hagman agreed, noting that while the industry is remarkably resilient—pointing out that NYK has survived multiple wars and rebuilt from a single vessel in 1945—the human cost of this new instability is often ignored.
Fleet protection
The discussion also focused on the 2-2.5 million seafarers who operate “on the other side of the horizon”. Hagman probed the industry’s moral responsibility, asking how it is possible to “morally expose our seafarers to food deprivation for months through hijackings” and other threats that would be “unacceptable on the land side”.
He highlighted a lack of preparedness among even the wealthiest nations to protect merchant shipping. Using his home country as an example, he noted that Sweden, despite its high GDP and extreme trade dependence, “doesn’t have a single frigate” capable of protecting merchant vessels outside its own ports. This leaves shipping vulnerable in a world where the traditional “global hegemon” may no longer prioritise the protection of free navigation. The conversation was recorded a week before the start of the conflict in the Middle East.
Looking toward the future, the two discussed the shifting maps of global trade. As prosperity spreads, the centre of gravity is moving south and east, toward Asia, Africa, and Latin America. This shift is likely to break the “extreme size trend” that has dominated container shipping for years.
Hagman suggested a “slight renaissance” in looking at smaller vessels that can service regional ports with shallower waters, moving away from the “mega-ports” and toward “service reliability and boutique operations”.
Despite the geopolitical “storm” currently being weathered, Hagman said he remains a long-term optimist. He pointed to the “phenomenal growth” in global prosperity since 1980, noting that billions of people have been lifted out of poverty, creating an “everyday rationality” among consumers that continues to drive demand. While tariffs and regionalisation make logistics more complex, Hagman believes the “underlying consumers” will continue to seek out the value that global trade provides.
The challenge for the next decade will be maintaining this prosperity in a world that is no longer “benign”. As Hagman concluded, his company continues to invest in the belief that the world will eventually return to being “commonsensical”, but that outcome is no longer a given.
Source: Baltic Exchange
