North America now accounts for half of ZIM’s container-shipping business.
When ports on the U.S. West Coast became congested during the 2014-2015 contract negotiations between the International Longshore and Warehouse Union and Pacific Maritime Association, ZIM sent “extra loaders,” ships deployed to meet a surge in demand from shippers trying to move their cargo from the Far East to the East Coast.
It’s a good example of the kind of nimbleness that ZIM, which is not part of any major carrier alliances, is able to exhibit, said George Goldman, president of ZIM American Integrated Shipping Services Co., in an interview.
“I had to compete against it,” said Goldman, who joined ZIM last summer, and took over leadership of the company’s U.S. operations in October from Leah Bogatch-Genosar, who has since become a vice president at Mediterranean Shipping Co.
Prior to joining ZIM, Goldman had a 25-year career at APL, most recently serving as senior vice president and head of commercial where he had stepped into the shoes of Gene Seroka, after Seroka became executive director of the Port of Los Angeles in 2014.
Before that, Goldman was in charge of APL’s operations in China for a decade, and previous to then held stints for APL as director of sales in the New York region and transpacific trade in Singapore.
Those extra loaders evolved into a new ZIM service, the ZIM Seven Star Express (Z7S), which was launched in May 2015, part of a strategy that ZIM Chief Executive Officer Rafi Danieli said was “focused on customers’ needs and based on excellence and efficient service.”
(The new service coincided with the Israeli carrier’s 70th anniversary, and the “seven star” name reflects the company flag, painted on ZIM ship stacks, which in turn is based on the original national pennant created by Theodore Herzl in 1896.)
The United States and Canada are important markets for ZIM—in 2015, more than 50 percent of the company’s activities were related to North America.
The company’s website lists 21 cargo services—12 to and from Asia, three to and from the Mediterranean and Black Sea, and six to and from destinations in the Caribbean and Latin America.
Based in Norfolk, Va., Goldman heads a unit that employs just under 500 employees.
ZIM restructured its debt in 2014, and as part of the deal, lenders and shipowners received 68 percent of its equity, reducing the share held by ZIM’s former parent, Israel Corp. ZIM and other Israel Corp. subsidiaries were spun off in 2015 to a new company, Kenon, which today owns 32 percent of the liner carrier.
ZIM had a financial turnaround in 2015. Volume fell 2 percent from the prior year to 2.3 million TEUs, but it reported a $7 million profit on revenue of $2.99 billion, compared with a $198 million loss on revenue of $3.41 billion in 2014.
The company also restructured so that its operations within countries were given “a bit more autonomy and the ability to control their destiny,” Goldman said. “It is in line with the company’s overall strategy to act quickly and connect a little more on a local level.”
Shipping businesses are highly network organizations, he explained, and “the more nimble you are on a country level, enables us to act quicker to the market.”
The U.S. market has always been important to ZIM because of its services to the Eastern Mediterranean, but Goldman’s long experience in China with APL will place him in good stead at ZIM.
“We made a concerted effort to focus in on the U.S. East Coast from Asia, in particular. That doesn’t mean that we’ve neglected the Med or other parts, but we’ve taken the approach to be independent where we think it makes the most sense and where we have critical mass,” he said.
ZIM has focused on North America services that exclusively use containerships it owns and operates on routes which call the
East Coast of the United States and Canada. These include the ZIM Seven Star Express (Z7S), a trans-Suez service to South China, Southeast Asia, and Indian Subcontinent; the ZIM Container Service Pacific (ZCP), a trans-Panama service to North China and Korea; and the ZIM Container Service Atlantic (ZCA) to the Mediterranean.
Goldman said these services guarantee ZIM stability at a time when the outlook for existing shipping alliances has become less certain. That’s because the mergers of COSCO and China Shipping (which belong to the rival CKYHE and Ocean 3 alliances), as well as CMA CGM and APL (which belong to the Ocean 3 and G6 respectively), may cause a reshuffling of global alliances.
While not a member of one of the four big alliances between container liner companies—the 2M, Ocean 3, G6 or CKYHE—ZIM is involved in many vessel-sharing agreements with other carriers to the United States and Canada. For example, it partners with the G6 on three different Pacific North Express Services (NP1, NP2, and NP3) between Asian ports and Tacoma, Seattle and Vancouver, British Columbia, and contributes ships to the NP1. It charters space from Evergreen on a service to Los Angeles and Oakland, and so on.
Goldman said this blend of independent operations and partnerships with other carriers has been a change for him from his time at APL, a member of the G6.
“I will say coming from a large alliance there’s a huge advantage in the decision-making process as to the flexibility it lends,” he said. With large alliances, there is “little more of a challenge to come to a quick decision.”
Goldman said ZIM, like other carriers, is evaluating its services with an eye to how the demand will change when the larger locks in the Panama Canal open this summer.
Most of the U.S. population lives east of the Mississippi River and there is an anticipated explosion in cargo coming out of the U.S. Gulf, he noted, particularly plastic resin. ZIM has a hub in Kingston, Jamaica, that it uses to feeder cargo for various services into the Gulf region.
“We’ve put the stake in the ground for the U.S. East Coast. I could safely say that when the Panama Canal does expand, I think that you will find that that will be part of a two-pronged approach on the U.S. East Coast—one via the Suez Canal and one via the Panama Canal,” he said.
The company will be able to better balance its network by sailing equal size ships through both canals, he said.
“Really the ‘X factor’ going forward is when New York finally gets the Bayonne Bridge up,” Goldman said. The Bayonne Bridge at the Port of New York and New Jersey is being raised to allow larger containerships access to the terminals at Elizabeth, Newark and Staten Island. Navigational clearance is scheduled for late 2017, and completion of the entire project is expected in 2019.
The information service Alphaliner listed ZIM on April 8 as the seventeenth largest container carrier in the world with a fleet of 78 ships and a capacity of 344,784 TEUs. It said only seven of those ships were owned (32,052 TEUs of capacity) and 71 were chartered (312,731 TEUs of capacity). ZIM, APL, Wan Hai Lines, and X-Press Feeders Group are the only companies among the top 20 container carriers that have no ships on order, and ZIM has the highest share of chartered ships in its fleet, 90.7 percent, of any of the top 20 carriers.
Goldman said, however, that relying on chartered ships has not been an impediment to obtaining space on large ships through space charters or swaps. And he noted at the moment, with plunging fuel prices, the economies of scale that larger ships offer has diminished.
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“At some point in the future, when that tide turns, by all means I think that we have to relook at our size in certain areas,” he said.
While ZIM had a good year in 2015, Goldman said there was deterioration in the market late in the year. (In contrast to the full-year profit, ZIM had a fourth quarter loss of $28 million in 2015, compared with a loss of $7 million in the fourth quarter of 2014.)
“There really isn’t a rhyme or reason why the ocean freight rates are where they are today,” he said. “Most of the shippers I’ve talked to are poised to have a pretty good year this year. We really don’t see a huge tailing off of demand, be it inbound or outbound.”
As ZIM negotiates transpacific eastbound contracts, he said “they’re going well. We’ll see how the dust settles after the first quarter.”
But given the sharp drop in freight rates seen in indicators such as the Shanghai Containerized Freight Index, Goldman said it’s expected the first quarter of 2016 won’t be as good for the container industry as was the first quarter of 2015.