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Zim ship. Industry still in vulnerable condition Photo: Danny Solomon
Zim ship. Industry still in vulnerable condition Photo: Danny Solomon
 
 

ZIM sees tough 2013 shipping markets

Israel-based company posts its best quarterly results since third quarter of 2010 due to recovery in market conditions, cost-cutting measures and positive seasonal effect

Reuters
Published: 12.21.12, 14:47 / Israel Business

Israel-based ZIM Integrated Shipping Services says global economic uncertainty and overcapacity in the shipping industry could lead to worsening market conditions next year.

 

ZIM recently posted its best quarterly results since the third quarter of 2010 due to a recovery in market conditions, cost-cutting measures and a positive seasonal effect as the third quarter is the industry's peak season.

 

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Despite the strong results and improvement in liquidity, ZIM believes the industry is still in a vulnerable condition.

 

Available capacity has increased, resulting in imbalances in supply and demand and putting pressure on freight rates. Volatile oil prices also affect the industry.

 

ZIM President and Chief Executive Rafi Danieli said that while there has been some pick-up in demand, it is not enough to cover oversupply.

 

"Today about 4.5-5% of the world's fleet is idle," he told Reuters in an interview.

 

To cut fuel consumption, shipping companies are also reducing speeds.

 

"In the last two years we put a lot of effort into being more efficient. We made some organizational changes," Danieli said. "We see a big improvement in our results which are now above the industry average. We are more focused on profitability and not on market share."

 

This is reflected in a reduction in the number of vessels it charters, rather than idling ships, he noted. ZIM has over 100 vessels in its fleet.

 

Seeking gov't permission to split company

ZIM, a subsidiary of conglomerate Israel Corp, had a net profit in the third quarter of $16 million, compared with a loss of $66 million a year earlier during a downturn in the shipping industry.

 

Revenue in the quarter rose 9% to $1.06 billion due to a 10% rise in the average freight rate to $1,444 per 20-foot equivalent unit (TEU). Carried TEUs fell 4.5%to 617,000.

 

ZIM's liquidity improved in the quarter due to strong cash flow and refinancing transactions.

 

While trade has slowed on major Asia-to-Europe routes due to the weak European economy, Danieli said 40% of ZIM's routes are based in the Pacific, with routes from Asia to the Mediterranean and Europe accounting for 20%.

 

The CEO said it was difficult to predict whether the industry would see more consolidation but he expects carriers will cooperate more closely.

 

ZIM is in talks with the government - which sold the company to Israel Corp in 2004 - regarding a possible split of the company between its Israeli and international operations. Such a move would make forming cooperation agreements and joint ventures much easier.

 

International activities account for 85% of ZIM's operations.

 

 

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