IRISL Sees Business Back to Normal by Mid-2017

EghtesadOnline: Container shipper Islamic Republic of Iran Shipping Lines Chairman Mohammad Saeidi expects the firm to have recuperated by the middle of next year the business lost while Iran was subject to nuclear sanctions.

News ID: ۷۳۷۷۵۰

29 October 2016

"Step by step, the problems have been resolved, removing many restrictions and limitations," since the sanctions were lifted, he told Reuters in an interview at a shipping conference in Copenhagen.

"I think at the maximum in mid-2017, the whole thing would be in the normal manner (of) things."

Western-backed sanctions against Iran's nuclear program were lifted in January this year after Iran agreed to scale back its uranium enrichment, though the country had always maintained that it never sought to develop atomic bomb.

Saeidi added that he hoped to see remaining limitations on dollar transactions removed after the US presidential election and that IRISL was negotiating with shipyards and manufacturers on the possible purchase of new vessels.

IRISL—once a global shipping power—was severely hit by prolonged anti-Iran nuclear sanctions. The lifting of sanctions has paved the way for IRISL’s resurgence and cooperation with international companies. IRISL has so far reached four agreements and signed 30 memoranda of understanding on cooperation with American, Asian and European shipping firms

Earlier this month, Saeidi said IRISL is planning to expand its shipping fleet by the end of 2020 by utilizing mega-size container ships and Ultramax class bulker carriers.

The company’s maritime fleet consists of 115 oceangoing vessels. IRISL Group is currently the world’s 22nd largest containership operator with a 97,871 TEU capacity, placing it between the Hong Kong-based shipping lines of KMTC (102,245 TEU) and SITC (88,467), according to the global shipping monitor Alphaliner’s ranking of top 100 shipping firms.

> Maersk Line's Comeback

The world’s largest container shipping company Maersk Line has recently resumed calls to Iran after a five-year hiatus and hopes that access to a new, rapidly growing market will help it through the current downturn.

Maersk Line is the global container division and the largest operating unit of the A.P. Moller–Maersk Group, a Danish business conglomerate.

“We are excited to announce that we have reinstated our services in Iran. This means that our customers can once again utilize our global network, large fleet of vessels and equipment, weekly departures, superior transit times and innovative suite of e-business solutions, both to and from Iran, subject to country specific regulations,” read a note on the Copenhagen-based company’s website.

Container lines, not just Maersk, have been struggling since the 2010 financial crisis, when the GDP multiplier, which refers to the rate of growth in container shipping as it relates to global GDP growth, evaporated.

The multiplier from 2000 to 2008 was 2.2x with x being global GDP growth, which had averaged around 4%. Since 2010, it has shrunk to 1.1x while GDP growth fell to an average of 2.9%.

That slower rate of growth dovetailed with a surge of mega-ship newbuilds that have created an enormous capacity surplus and the conditions that led to Hanjin Shipping’s abrupt collapse. That capacity glut is so large however, that Hanjin’s failure did little to resolve the issue, as spot rates on the trans-Pacific and Asia-Europe trades showed in the month of September, according to Financial Tribune.

Given these difficult conditions, other container lines have also looked to Iran for volume growth. CMA CGM, for example, teamed up with IRISL to share vessel capacity and jointly operate routes and marine container terminals.

“It is hugely exciting that after a five-year absence, we are again able to offer Maersk Line services to customers to and from Iran. After a period of relative isolation, access to this new market will present significant growth opportunities for Maersk Line in a market that today represents approximately 700,000 FFE but is expected to grow significantly in the coming years,” said Christian Juul-Nyholm, managing director, UAE cluster, Maersk Line.

> Resuscitating Irano Hind Shipping Co.

It was also reported last month that state-run Shipping Corp. of India Ltd., struggling for respite from an industry downturn, plans to revive a 40-year-old joint venture with Islamic Republic of Iran Shipping Lines.

The easing of sanctions on Iran opened the way to resuscitating Irano Hind Shipping Co., which potentially offers access to Central Asian markets such as Kazakhstan, according to the Indian company’s Chairman B. B. Sinha.

“We don’t want this company to just die out,” Sinha said in an interview on Wednesday, referring to the joint venture. “The other partner, Islamic Republic of Iran Shipping Lines, has got great presence in the Caspian Sea,” he was quoted by Bloomberg as saying.

India’s largest carrier and IRISL had in 2012 decided to dissolve the Tehran-based joint venture, after years of sanctions against Iran crimped trade flows.

Indian Prime Minister Narendra Modi is striving to scale up India’s ties with Iran, as the latter opens up to the world again. India is considering up to $20 billion of investment in the Persian Gulf nation’s ports sector and energy industry.

The Indian company is mulling whether to operate three bulk carriers and an oil tanker owned by the joint venture. It owns 49% of Irano Hind Shipping Co., while Islamic Republic of Iran Shipping Lines controls the rest.

Oil exports have surged from Iran after sanctions were eased. Shipping Corp. resumed crude shipments from the country in July after a gap of four years.