Journal of Commerce / May 11, 2000
By Larry Luxner
RAMAT AVIV, Israel -- Zim Israel Navigation Co. Ltd. ranks as Israel's fifth-largest company, with 1999 revenues of $1.6 billion -- yet its activities are virtually unknown to most Israelis.
That's because 80% of Zim's business is conducted outside Israel. Few locals are aware that Zim is today the world's 10th-largest shipping conglomerate, handling a total capacity of 150,000 twenty-foot equivalent units (TEUs) a year. And despite a number of problems ranging from strikes to secondary boycotts, the Haifa-based entity expects to turn a profit this year.
"We have some major enemies to struggle with," conceded Dr. Yoram Sebba, Zim's president and CEO, during a lengthy interview in the Tel Aviv suburb of Ramat Aviv, where Zim has a branch office.
"The first is the high cost of fuel, which hits everything. Prices have increased substantially, and are now more than twice as high as a year ago. We are very much like every big shipping company, and Zim consumes 10% of Israel's crude oil. You can imagine what happens when there's an increase of only $1 per ton. It costs us $1 million."
"Our second problem is that the rate for chartered ships has climbed dramacially. As a very intensive consumer of chartered vessels, I feel this very intensely," Sebba told The Journal of Commerce. "Thirdly, we are still feeling the effect of the Asian crisis. The Asian countries lost their purchasing power. Their currencies became so weak, they were forced to produce what they needed rather than import. That affected me because I'm in the transportation business."
An industrial engineer by profession, Sebba, 58, has been a Zim employee for 25 years. He was vice-president for planning, engineering and information systems before being appointed to head Zim in early 1997. The huge company is owned 48.6% by the Israeli government, 48.9% by the Israeli Corporation Ltd. and 2.5% by "private entities unknown to us," said Sebba.
Zim's boxes, seen every day in shipyards from Singapore to San Juan, bear a unique blue-and-silver, English-Hebrew logo almost as old as the company itself, which began operations in 1948 -- the same year as the establishment of the State of Israel. Zim started out bringing European immigrants to Israel on old cargo vessels -- some of them carrying 15,000 people on a single voyage.
Those rickety boats, seized by the British and eventually scrapped after Israeli independence, bear no resemblance to Zim's current fleet of modern cargo ships. In 1999, Zim's 80 chartered, leased and company-owned vessels carried 1.18 million TEUs, a 12.6% jump over the 1,05 million TEUs carried in 1998. The company has a workforce of 3,200 employees, most of them outside Israel.
Asked how a small nation with only six million inhabitants could produce one of the world's shipping giants, Sebba had this to say:
"We lived for many years with the only outlet we had, the sea. Secondly, as we do not have too many natural resources, the country is very much dependent on exports and imports. Thirdly, our trade depends on countries which are far away from us. Without a strong, healthy and comprehensive shipping industry, we'd have problems," he said. "Today, we are a global carrier. Therefore, everyone competes with us."
Last year, Zim's revenues came to $1.6 billion, with $25 million in after-tax profit -- an improvement over 1998, when the company lost $5 million, and a big jump from 1997, when it lost $38.9 million.
This year, he expects Zim to make a profit, even though labor disputes over the pending privatization of the ports of Ashdod and Haifa have cut into revenues.
"The problem is very basic," he explained. "For years, Israel neglected the infrastructure of its ports. A U.S. terminal that is utilized more than 50% is already congested. Here, the ports are utilized close to 100%. Yet I admire that Ports Autrhority. Everybody's trying to put the blame on their shoulders, and this is unfair."
Sebba, whose company handles 60% of all container traffic at the Port of Haifa, and 30% of container traffic at the Port of Ashdod, said the ports must be privatized because at present, neither port can compete on tariffs.
"The principle must be that only the private sector knows how to do business, The arguments today are not over policy, but over how to do it," he said. "The government elected to do it in a certain way. All I want is that the ports be developed as soon as possible, because the country is not rich, and the needs are enormous."
The other problem is far more complex, and it involves the long-standing boycott of Israel by its enemies in the Arab world.
"The Arab boycott is very clear: a vessel cannot call on both an Arab and an Israeli port during the same voyage," says Sebba, though he notes that enforcement of the boycott has weakened in recent years.
At present, Zim has agents in 118 countries, including many African and Asian nations that don't have diplomatic relations with Israel. Last June, for example, it began serving the Cambodian port of Sihanoukville. And a check of the company's website reveals Zim agents in predominantly Muslim nations like Bangladesh, Djibouti and Morocco.
"We don't have peace with Syria, Iraq or Iran. We still cannot call even indirectly with Israeli vessels on Indonesian or Malaysian ports," said Sebba. "However, it's no secret that peace with Syria means peace with 20 other countries. It would be stupid not to prepare ourselves for peace."