“Achieving such a record is unprecedented during 19 years of operation” General Director of Container Shipping Co., Cap. Hamzeh Keshavarz, said in an interview with MANA correspondent Referring briefly to the integration of large container companies and the formation of new alliances, he outlined this company's future plans in this interview. Below is the whole interview.
How do you evaluate the situation of the container division of IRISL in recent months?
Cargo shipment has grown considerably both from Asia and Europe, such that in the first two months of the year (Iranian calendar- April & May), approximately 195 thousand of TEU is transported, merely from Shahid-Rajaee port that is 52.5% of the port's total performance. This market share is even more than the sanctions era in which foreign lines did not come to Iran. However, currently 17 large foreign container lines traffic directly and weekly and the other lines also transship via Dubai. As for the grace of God, the wisdom of senior management of the group and the hard work of our colleagues, we are now in a place that our market share is more than the time that no foreign lines came to the country.
Hafez Darya Co. along with Valfajr Shipping Co. carried more than 78% of the Iran’s cargo during the sanctions, 28% percent of which is carried by Valfajr Shipping Co. from Dubai and the containers of other lines. Now, this number is only the share of the Container Shipping Co. compared with other lines. In addition, in terms of the performance compared to the first two months of the previous year, we have experienced 61 percent of growth and the freight rate has been also significantly increased.
As you have mentioned, will the boom return to the world's container division?
All the main world corridors of Asia to Europe, Asia to the Persian Gulf, India to Europe, Europe to India, and Europe to the Persian Gulf witnessed the growth in freight rate after the formation of the strategic alliances. Some of the shipping lines could also get out of red status, namely Back to Black in their own words. Although some of them are still in the red status, their loss is far less.
How is the cooperation of Container Shipping Co. with other international lines?
A series of measures are taken to cooperate with the International Lines. The service of India to Iraq had a good growth in terms of international transportation. Some of the international lines are interested in participating in this service and we are currently investigating the issue. Fortunately, we have experienced a very good trend in the growth of international cargo transport in the container division. Despite the loss occurred for the world container lines at 2016, we could pass the year with profitability and have an acceptable performance for our shareholders and the macro management of the company. We hope to have good news in the field of international cooperation with other lines.
To what extent the implementation of JCPOA was involved in the increased performance of Container Shipping Co.?
In fact, JCPOA facilitates the traffic of vessels, the company's relationships with foreign lines, terminals, and ports. Some of the major and bulk cargo owners that could not work with IRISL Group due to the sanctions have returned to us and we could compete with foreign lines in a fair and more appropriate condition. During this time, our market share at Shahid-Rajaee port was unprecedented during the operation of container division at IRISL. It means that the share we have experienced during the two first months of the year (Iranian Calendar) was unbeatable during 19 years of operation of Container Shipping Co. in a way that even the foreign lines could not get this share during the sanctions.
However, along with Shahid-Rajaee port which is the main container port of the country, the other ports also have the same conditions or even are in a better one; for example, our market share at Chabahar port is approximately 90 percent.
Another event that happened in the recent period is establishing a direct line from Candela and Mundra ports of India to Chabahar port. Currently, about 3000 containers are reserved that should be transported in this route and a significant number have been discharged.
How do you evaluate the recent developments in the container market?
There is a while that we are witnessing the integration of some companies and then the formation of the strategic alliances to the remaining companies in the global markets of the container. Therefore, nine big container lines either bankrupted, merged or were purchased by other lines. From the first of April 2017, the remaining lines have formed three major strategic alliances. M2 Alliance contains two big lines of Maersk Line and MSC Line. The other one is Ocean Alliance that includes CMA CGM, COSCO (Which is merged with China Shipping Lines), EVERGREEN and OCCL shipping lines. The other union called THE Alliance which consists of three Japanese lines names, NYK, K Line and Mitsui O.S.K. Lines (that is merged together). In addition, Hapag-Lloyd Shipping Company is merged with a United Arab Shipping Company and ultimately this is Yang Ming that leads to the formation of this alliance.
The activities of these alliances began in the first of April and at the same time; we witnessed a significant increase in worldwide container freight rates across the world. Currently, the freight rates of all the routes increased between 60 to 100 percent.
What was the reason for the formation of alliances?
The reason for the formation of alliances has different factors. The main factor is that they could cover more routes by sharing each other's vessels at a lower cost so that they somewhat could control the rates. Optimal capacity management is applied in order to prevent parallel services. it means that instead of using two services on one route, they could use one service. So, two empty vessels would not traffic and instead, another vessel would be used in another route. They would be able to more complete their network coverage and reinforce Point to Point traffic instead of transshipping. A line that covers a division could be at the disposal of everyone, instead of participating in the network of other lines. Obviously, the fuel consumption would be lower, less carbon dioxide would be released and it would be in favor of the earth in terms of environmental perspective. However, it has also some disadvantages in a way that it would create some obligations and in most cases would be backfired, so that we must be very careful in the selection and entry to them.
Does the formation of such alliances lead the activity to oligopoly?
Yes, it does. The container world will move toward oligopoly. However, a few years ago, UNCTAD had given this warning that the number of container lines that traffic to each and every port of the world, will be diminished year by year and the ports will be under the coverage of a smaller number of lines, this means moving toward oligopoly .
What are the plans of Container Shipping Co. for the future?
We intend to maintain the profitability of the company. We have planned for about 14 thousand and 500 containers for large vessels that will be delivered up to 10 months. The purchase of new containers is also on the agenda and we have to make a market with proper slope and need to have load increase. We will connect the European service of Container shipping Co. to India. In other words, the new line will be Europe-India line that is part of the company's strategy to strengthen the international market and is not related to Iran’s cargo. Concerning the international cargo, we hope to gradually reach to the pre-sanctions era that provided approximately 50% of shipments and revenues.
Now, in Bandar Abbas port, the containers are transited to India and Europe as transshipping to prepare a triangle service that transit from Europe to Iran, from Iran to India and again from India to Europe in order to absorb directly the imported and exported cargos of India and Europe.
The next plan of the company is providing the required containers. In this regard, the approval of the board of the holding company is taken. One of the existing problems in the global level is the cube container shortage. According to the new capacities that will be added to the fleet, we have planned the container supply schemes based on the amount needed for large vessels that will be built in South Korea and also for Iran-Kashan ship. Then, our colleagues at Technical Department of Commerce Division could procure them with a good price and suitable terms.