Haifa-based shipping giant Zim Integrated Shipping Services has reached a strategic cooperation with two of the world’s biggest container shipping groups to jointly operate lines between Asia and the US East Coast.
The pact has been set up with vessel operators Maersk Line and Mediterranean Shipping Company (MSC), to jointly operate ships on the route, which is one of the most central for world trade, Zim said in a statement on Thursday.
Maersk, the world’s largest shipping company, already has a route-sharing cooperation with MSC, called 2M. Zim will now join that alliance in an accord that will run for seven years.
The cooperation is a “huge achievement” for the Israeli company, which accounts for just 2 percent of the global shipping industry, Eli Glickman, the firm’s president and CEO said in a phone interview with The Times of Israel. The Israeli company, ranked 10th out of the 12 largest firms, has become a key player on this route, he said, which has paved the way for this alliance.
Shipping firms — like airlines — have realized that joining forces on routes improves efficiency and cuts costs, while also providing better service for customers. The nine largest shipping companies are banded into three large alliances, said Glickman, who joined Zim as its CEO a year ago. The Israeli firm “was the ugly duckling” of the group, left out until now, he said.
In the last year, the firm increased its market share in the Asia-US East Coast line, he said, taking 8% of that market. Zim’s total trading volume has also doubled, he said.
Running five lines jointly with Maeark and MSC, starting early September, subject to regulatory approvals, will increase the range of services for the customers of the shipping firms and cut costs for Zim by some “tens of millions of dollars a year,” Glickman said.
Zim will operate one line — or loop as it is called — and 2M will operate four loops, and the parties will swap slots on all loops.
The new cooperation offers Zim’s customers a more comprehensive product portfolio with a wider range of direct lines in Asia and the US and faster transit time, Zim said in a statement.
The agreement, Glickman said in the statement, is “a vote of confidence by the two largest players in the industry, acknowledging Zim’s capabilities, reliability and strength. Furthermore, it will enable ZIM to achieve operational efficiencies and ensure our ability to maintain a leading position” on the route.
The parties expect to disclose more information about network changes and schedules on the trade as soon as possible, the statement said.
While the global shipping market was in a decade-long funk, with structural changes resulting from an extensive activity of mergers and acquisitions, 2017 showed an improvement across multiple fronts. A rise in oil prices this year, however, and a drop in freight rates, hurt the shipping business and put a strain on profitability.
Zim posted a 14.7% rise in total revenues for the first quarter of 2018 with an increase in the volume of cargo carried, but posted net loss of $34.1 million for the quarter, compared with a net loss of $6.4 million in the same quarter a year earlier. The firm posted net profit of $11 million in 2017.
Glickman said that the firm will continue to operate independently and to implement technological changes at the company to help boost profitability. Last year the firm said it was about to revolutionize maritime shipping, bringing the blockchain technology to the industry.