Maritime trade hub places focus on decarbonization

Maritime trade hub places focus on decarbonization

Claus Holstein, CEO, Port of Aalborg, points out new trends and challenges that are affecting maritime trade and logistics and what the port is doing to promote sustainability and digitization in its operations and clients.


How significant is Port of Aalborg to Denmark’s trade and industry?

The Port of Aalborg is at least 550 years old. Its function remains the same in that we create value and jobs and take care of transportation and distribution. We are property owners to about 4 million to 4.5 million square meters of land and are the biggest and most advanced infrastructure provider in the area. We have buildings, storage space, cranes and other infrastructure. In the Danish context it is a big port when it comes to landmass. We handle just under 100 million tons of cargo in all of Denmark, and the Port of Aalborg handles around 3 million tons of it; we have 3 percent of the country’s cargo and 10 percent of the business.

We are a seafaring nation in essence and always have been. Our coastline is long, and ships are our traditional means of transport. About 70 percent of export-import activity in Denmark goes through ports. There are more than 100 ports in the country including five big ports, 17 midsize ports, and 50-60 smaller ports. The Port of Aalborg has operated for half a century and will continue to do so for the next half. A notable example of our importance is that we did not close our operations during the COVID-19 crisis; we were asked to stay open every day of the week, 365 days of the year. We are a critical piece of infrastructure.


What significant trends have changed the way the port operates?

While we like to say our operations remain the same, much has changed. We are currently experiencing a modality shift. The European Union is asking us to transition from trucks to other means of transportation. Goods go from trucks to ships and from trucks to trains; this is the trend that we are seeing. In our current state, we see ourselves as a bit of an affliction on the society we are serving. We are not serving ship owners, rather we are serving society. When society changes—and it has been changing rapidly for the last 20 to 25 years—we must also change rapidly. For the moment, our power lies in oil tanks. In the future, we will store methanol or whatever is needed. We follow society when it comes to change. We are adding new business models. We are adding a green business model and moving towards greater optimization.

We essentially follow three megatrends and have been doing so for quite some time. The first is globalization, formally internationalization, which is the concept of belonging to a global world. All our clients—exporters, shipping companies and the like—think globally. Denmark has a small open economy with a considerable proportion of our production dedicated to exports. We also greatly depend on imports. The second trend is digitalization, which is a tool to unlock the third trend, green transformation.

During the pandemic we were surprised that nothing really happened. Cargo traffic remained decent, net profit was good and our increase in sales was normal. We were more profitable because we saved on costs due to the lack of travel and time spent with our customers. Looking at the fiscal year, 2019 was excellent, and we found our business could be conducted more efficiently using innovative technologies. However, the post-COVID-19 period is another story. Although the pandemic did not hit us hard, we are now looking at a much more complex problem. We must invest a lot of money and things are starting to get complicated.

The main part of our business is to construct new buildings, but we are currently in the middle of a huge rise in inflation. It is about 30-35 percent more expensive to build a building in Denmark. The cost of labor is going up and labor is scarce. Interest rates are also increasing. We will see what is going to happen in the next six to eight years and whether this inflation will fade or continue. Additionally, there are obstacles in global trade. The cost of transportation between China and Denmark went up by 50 percent within three months. The issue is how to connect with the world and how the world will perform globally. Although we never closed any factories in the area, most companies that we are sourcing from closed for extended periods of time and we had to change a lot of our purchasing systems. We are waiting to see what will happen to global logistics chains. The world has changed, and it is up to us to decide how we cope with these changes.


What strategy is the port following to remain competitive?

When you look at ports in terms of ships, it is a declining market; cargo in and out of Denmark is lessening. However, the inland port infrastructure supports a city, industry and transportation system, and this is growing. Over the last 10 fiscal years, we went from a turnover of $15.6 million to $35.8 million; we have had stable growth of 10 percent on average per year. Even in the financial crisis years ago, we still grew about 10 percent. However, things are changing. We are becoming less and less of a port and more of an infrastructure provider; we build factories and warehouses. We are now more involved with trains, ships, trucks and other modes of transport. Denmark is growing as an economy, and we grow with it because we support a bigger part of society than just the port.

Our strategy is very simple. Every 10 years we must double our turnover. We call the plan Mission 400 because we will go from a turnover of 200 million kroner to 400 million kroner in 10 years by investing 2 billion kroner, which is more than $300 million. We are investing heavily in infrastructure. We are now working to add a green, intelligent and sustainable business model to live up to the demands of our society and the EU. We need to organize along with networks of companies to reduce our carbon footprint. It may not be difficult, but it is very costly. Most of what we are going to do will involve heavy investments and gathering knowledge. Another large change is our collaboration with universities and other businesses, ports and airports. We can no longer develop alone; collaboration is a huge part of our strategy. We see ourselves as part of a large network of actors that work together.


What efforts is the port making to lower carbon dioxide emissions from its operations?

We need to foster recognition of Aalborg as a European green hub and develop sustainable business models for our local companies. It sounds simple, but it is very complicated. We must look at every company in the port and convert them from a black business model to a green business model. Denmark could be one of the leaders in sustainable industry in Europe, but we need to learn to cooperate. The task at hand is so big that transformation can only be done together. We began by reducing electricity consumption five years ago by 40 percent. This took tremendous effort, but we succeeded. We changed our cranes to more environmentally friendly cranes; we bought electric bicycles and cars instead of normal transport; and we shifted to LED lighting.

The remaining emissions cannot be reduced without collaborating with others; companies that work in the port control the final 60 percent. To do this we are looking into every detail surrounding our customers in terms of what kind of output they produce and how we can turn that into input for other customers. We required studies to be conducted that are out of our engineers’ scope and therefore needed to team up with universities. We are also endeavoring to make our customers and users understand how they can contribute to a decrease in consumption of energy and how we can recycle waste.

Our next step is to optimize energy efficiency on buildings because they are our biggest asset. Our main challenges are optimizing energy consumption and reducing wasted heating. We also must do more when recycling our residues. We have installed some solar cell systems, but the easy wins were already accomplished in the first 40 percent reduction in emissions. Now every reduction of 10 percent requires a large amount of investment. That is where the aforementioned 2-billion-kroner investment plan comes in. There is a long road ahead of us. People are looking towards Denmark and saying it seems that we have the epidemic under control and that we are on the forefront of green transformation and digitalization. One of my goals is to invite 10-15 new high technology companies into these areas to help us transform the economy and produce greener products and solutions for us to use.


How has the port incorporated new digital technologies into its operations?

Ten years ago, we saw these upcoming major trends and contacted the university to collaborate. Three years ago, we cofounded a business school at the university specialized in the field of green business models and digitization to create new knowledge that we can use to innovate our port. We succeeded. When we were hit by the COVID-19 crisis we simply transferred over to the digital twin of the port and stayed at home. I was often the only one person in the administration office. We persevered and—in fact—our efficiency increased even though we were working remotely. The crisis showed just how digitally capable we had become. We managed to do business as usual and keep the port floating smoothly.

We are currently engaged in looking into data at the port, such as our heat and electricity consumption and how we can reduce it. It has become quite technical and centers around data analytics. Our staff has transformed into highly skilled and educated individuals. We have one university professor, three with PhDs, several with MBAs and master’s degrees and many engineers and specialists in technology. Becoming more advanced involves skilled people. We recently employed a chemical engineer because we are looking into understanding how power-to-x technology can be best used. As a traditional port and logistics unit, we are not experts on how energy systems work. We have moved from being sailors and seafarers to being engineers and specialists in the last 10 years. When I arrived in 2007 about 20 percent of the staff had an undergraduate or master’s degree, and now it is about 65-70 percent.


What is port doing to promote itself on the international market?

Denmark is what we call a 1-percent country in that we have a 1-percent share of the global economy. It is difficult to market Aalborg globally because we are small, even though we consider ourselves big in the Danish context. It is complicated to attract international investors. More than just a port, they typically need an airport, social security, jobs for their spouses and international schools for the kids. Therefore, Aalborg needs to be marketed under Denmark’s packaging, and that implies cooperation with Invest in Denmark and a high focus on marketing. We need to market Denmark as a place that is on the forefront of green transformation.

Marketing is moving towards digital. Most of the customers we are in contact with do not call us on the phone. They mine information off the web and do a lot of investigation before they call us. We need to make our marketing more digital and provide more data before engaging with potential clients. This is a massive change. Additionally, we are now part of a community of European inland ports. We now look to other ports that have the same ambition to function as infrastructure supporting industry to learn how to operate and manage this new terrain.


What offerings does the port have for companies and investors looking to join its operations?

Our tagline is Gate to Great. Our goal is to find very well-run companies and make them excellent. We want to continue in the same vein as the last 500 years in terms of efficiency, but now in terms of infrastructure and trying to understand the demands of companies that want to have advanced production and testing facilities. My vision is to invite innovative companies into this area, link them with universities and the community and try to help them to make more profits while also making them greener and more digital. Our advantage is that we are in a position where we can invest in these companies. Even though we are owned by the city, we are organized as a limited company. We can create a turnkey project for international investors in which they bring technology and knowledge and we provide infrastructure, growth, funding and customers. Our track record over the last 10 years proves we can guarantee growth.

Additionally, we can help small and medium-sized enterprises have net-zero emissions. The pressure put on small businesses to reduce carbon dioxide emissions is overwhelming; most of them cannot simply reduce their footprint by 70 percent. We offer to share this responsibility by looking at the five segments of multimodal industries. We want to benefit companies that want to work in the port. We help them look for materials and we are very good at producing iron and steel. We have one of the world’s largest blade factories that can be used towards all types of renewable possibilities, especially in the wind power industry. We also have a large community of experts in maritime works, logistics and the manufacturing of shipping industry products. We are looking to attract the same types of businesses while offering them help in reducing their carbon dioxide emissions by 70 percent and converting their outputs into new inputs. It is a complicated matter, but nevertheless this is the current demand of our customers.

If interested parties are medical companies, they should go to Copenhagen. If they are agricultural, they should go to Aarhus. However, if they are mechanical or are interested in advanced production and the five segments, they should look to Aalborg. The city is a small community, but we are extremely international. One will find we have the best technical universities in Europe and one of the best in the world. We have a tremendous amount of experience in production and manufacturing. It is a wonderful city with a tremendous amount of culture, gastronomy and sports. It is also very safe. You will often hear us say, “What is not to like about it?”