May.30--With major container lines ordering massive vessels and forging ever-larger vessel-sharing alliances, many smaller lines fear being drowned in their wake.
But as a niche carrier with a growing refrigerated forwarding business and aggressive plans to expand, Eimskip is poised to ride the waves fueled by larger vessels and booming inter-Asia trade. Much of this promise centers on the container shipping and refrigerated logistics group’s ability to handle a wider variety of reefer goods throughout the supply chain.
“We’re moving into areas other than fish,” Eimskip CEO Gylfi Sigfusson told the JOC in an interview at the company’s Reykjavik, Iceland, headquarters. “We are using our knowledge to handle fruits, vegetables, garlic, potatoes, meats and other commodities.”
Of the 26 ports Eimskip calls, it only faces fierce competition from the big carriers in lanes connecting to three ports — Rotterdam, Hamburg and Halifax, Sigfusson said. Many of the other ports require Eimskip’s specialty vessels that can operate without portside cranes and brave ice conditions and navigational challenges because of their strong bow and stern thrusters and ice class-strength hulls.
The major container lines are highly unlikely to muscle in on serving the majority of the smaller ports, along with the numerous fjords Eimskip reefer vessels call on to collect pallets of frozen fish. Samskip is the company’s main competitor for trade connecting to Iceland, although its operations are more centered on services to the Baltic, rather than within the North Atlantic.
“The fact that the big carriers are using bigger vessels of 14,000 to 18,000 TEUs in their trade lanes is an opportunity for us; it means there will be more chances for short-sea services,” said Sigfusson, who added that more slot reefer capacity also provides potential for the Eimskip’s forwarding and non-vessel-operating common carrier arm.
The heavy-hitters aren’t likely to dive into the niche services Eimskip provides, either. The company, for example, ships salmon from the Faroe Islands to England and Scotland, from where it’s flown to Shanghai and Boston, allowing sushi chefs to make rolls out of fish pulled from the frigid North Atlantic waters only days earlier.
But that isn’t enough, Sigfusson said. Eimskip is setting course to diversify its business in the North Atlantic and beyond. Nearly half of its operating revenue in the first quarter was tied to Iceland, with non-European business accounting for only 15 percent.
The company is discussing a potential dual listing of the company’s shares with the Central Bank of Iceland, the Oslo Stock Exchange and other foreign stock exchanges. A dual listing would allow Eimskip, which is listed on the NASDAQ OMX Iceland Stock Exchange, to more easily acquire foreign companies with equity in Eimskip, improve access to investors, boost analyst coverage and gain more debt-financing alternatives, Sigfusson said.
The company saw its first quarter profit drop 16.7 percent year-over-year to €6 million (about $8.17 million), as operating revenue slipped 1 percent in the same period to €104.2 million. Severe weather in January and February hurt the company’s sailing schedule, costing more fuel and overtime to be paid to foreign ports. Eimskip also took on additional cost by adding a vessel to its sailing schedule. A crew strike on one of its ferries didn’t help either.
Eimskip is looking at acquisitions and joint ventures involving container lines in the North Atlantic, both reefer and dry vessel carriers; container terminals; refrigerated warehouses; trucking companies; customs brokers serving the liner trade; and vessel investment and management.
Sigfusson hinted that the company was looking at coldstores in the Portland, Maine, region to strengthen new services to port. Eimskip, which began calling at the New England port in early 2013, has seen strong import demand for North Atlantic-caught fish, Icelandic water and technical equipment and exports of paper for the European news industry and other commodities.
The company decision to change its sole U.S. port of call from Norfolk, Virginia, a major military center, came after the U.S. Department of Defense pulled out of Iceland in 2006. And as New England’s first container service to Canada, North Atlantic and Europe in more than 20 years, Eimskip has received generous support from Maine’s government and business community, Sigfusson said.
Beyond seeking acquisitions, Eimskip plans to open two to three forwarding offices annually. Last year, the company opened offices in Thailand, Poland and Russia, bringing its forwarding footprint to 55 offices in 19 countries. About 75 percent of the company revenue comes from liner sailing and providing door-to-door services, including warehousing and trucking. The rest comes from forwarding operations. Eimskip’s reefer forwarding business jumped 13.4 percent in the first quarter, compared with the 11.1 percent rise in liner and related services. Roughly a third of the forwarding business is tied to intra-Asia trade, and that share is growing, Sigfusson said.
Challenges are ahead, though, even in Eimskip’s home turf. Regulatory authorities raided its Reykjavik office, along with those of Samskip, in the early hours of Sept. 10, 2013, citing an alleged breach of the Icelandic Competition Act. Even after an appeal committee told the Icelandic Competition Authority to explain the reasoning for the raid, Eimskip hasn’t heard anything, Sigfusson said. He hopes next month to get some type of answer on why employee e-mails and paperwork were seized.
Before the raid, Eimskip was helping explain to regulators how its involvement in various parts of the supply chain was key when serving such a small market as Iceland. Sigfusson also took pains to show that although Eimskip and Samskip are the major players in the market, the number of other logistics providers has tripled in the last six years. Sigfusson believes regulators are concerned Eimskip has its hands into too many links of the supply chain. Eimskip is hardly unique globally in operating as more than just a carrier, and regulators need to take a larger view.
Eimskip is also grappling with changes in the fishing industry. Capelin catches have been disappointing, but the company expects strong mackerel exports from Greenland, Iceland, the Faroe Islands and Norway. Encouragingly, Iceland’s economic growth appears to be gaining momentum after its 2008-11 financial crisis shook the island. Apartment construction is ramping up, major industrial projects are under way or planned, and more confident Icelanders tired of their aging vehicles are ordering more from Europe, Sigfusson said.
To help handle the expected increase in exports and imports, Eimskip will replace a 724-TEU vessel with an 875-TEU ship on a line connecting Rotterdam later this year. Eimskip expects to receive the vessel from China in late June, and another 500-TEU ship to transport Faroes salmon is on the way. The delivery of the first vessel will be a highlight of Eimskip’s 100th anniversary this year.
The creation of the shipping line helped Iceland gain international connections as it moved toward gaining independence from Denmark.
Similarily, Eimskip’s planned expansion could show other Icelandic companies, along with smaller container lines, how to stretch their arms further by harnessing the forces of globalization.