Iason Hellenic Shipping (IHS) boasts over 30 years of bulk shipping, ship management and fleet performance services. Managing Director Themistocles Petrakis discussed the company’s ongoing development and the state of the dry bulk shipping sector at large.
Currently managing four vessels (three Kamsarmax and one Ultramax) Iason Hellenic Shipping (IHS) is a leading international transporter of dry bulk commodities and ship manager with a history dating back to 1983. Currently comprised of 109 personnel – 25 shore based and 84 seafarers, IHS is headed by Managing Director Themistocles Petrakis.
“Whilst we currently manage four vessels, we have a platform in place that is ready to manage at any given time twice that,” said Mr Petrakis. “We believe that an effective management team needs time to come together and we invest in people first and then in steel.
“Now we are actively seeking to manage third party dry bulk vessels, giving third parties access to our fully fledged ship-management platform, our market beating OpEx structure and our wealth of accumulated experience; all that at a management fee that will be determined on a cost plus basis. For us, it is more important to attract quality assets than making a marginally better return.”
Headquartered in Athens, IHS has been awarded the Qualship 21 distinction by the US Coast Guard for all its vessels. The company is also amongst a select few dry bulk ship-management companies that has both its energy and environmental management systems certified under ISO50001 and ISO14001 respectively.
Iason Hellenic Shipping (UK) Ltd
The company has also recently established Iason Hellenic Shipping (UK) Ltd, a separate entity based in London that builds and maintains relationships with many of the charterers, financiers, insurers and lawyers that find their home in London’s shipping hub.
“IHS (UK) offers services to IHS in Greece with a scope of business presently revolving around the commercial exploitation of the vessels under management” clarified Mr Petrakis. “IHS (UK) is set up in a way that it can assume at short notice the provision of other ship management services if and when it makes sense for those services to be offered out of London.
“In recent years, we found it was increasingly more sensible to have a foot in an international hub that would bring us closer to our customers and that is why the office was setup in London. Our prime customers consist of large industrial companies and trading houses that makes it particularly difficult to understand their true needs without investing time and effort, let alone how to cater to those needs.”
Since 1996 when IHS acquired its first Panamax vessel, the company remained focussed on that class, but a shift came in 2013 when the decision was made to diversify into Ultramaxes.
In terms of commodities shipped, since 2012, the company’s statistics show grain as the key cargo, accounting for 47%. This is followed by coal (28%), iron ore (7%), fertilisers (4%) and Bauxite/Alumina (3%). The remaining 10% is categorised under miscellaneous.
“Historically, Cargill and Bunge together made up circa 30% of our annual revenue on average, but last year, Cargill alone accounted for 25% of our annual revenue,” noted Mr Petrakis, who also revealed that at 32%, Brazil is the company’s predominant country to load from.”
Following Brazil, IHS loads 13% from the US east coast, 12% from Australia, 7% from Indonesia, and 5% from Argentina, South Africa and Canada respectively. 21% of the cargo goes to China, 16% to India and 9% to Brazil. The Persian Gulf and the US east coast both receive 7% of cargo.
Assessing the statistics, Mr Petrakis said he strongly believes that there is a lot of opportunities to be had in the Brazilian and Australian routes to China.
“These are already massive routes today, but there is still a lot more cargo to be moved from those countries into China, and secondarily, into India.”
Utilising RACI and balanced score cards
Away from the day-to-day operations associated with ship management, behind the scenes, IHS has worked on a number of important projects aimed at improving the company’s overall structure, efficiency and transparency.
“The first was a complete reorganisation which was initiated by accountancy and consulting firm Deloitte,” said Mr Petrakis. “Among other things, this included a complete overhaul of our processes premised on the horizontal hierarchy rather than the usual vertical hierarchy that is relevant to the reporting line, but doesn’t really show the interdependencies of departments and the interdependencies of individuals in the performance of the full spectrum of activities undertaken by the company’s personnel.”
With that in mind, Mr Petrakis and his team adopted a business process model around a proprietary tool that Deloitte provided, called RACI.
“Using RACI, we have disintegrated all our processes into individual activities, per process owner, meaning we know the responsible individual performing each activity and the individuals with whom interaction is necessary to perform each activity. It has been a very helpful tool in terms of both the way our colleagues perceive their role, as well as in team building and task ownership. That was a project undertaken back in 2006 and is still a critical part of daily operations.”
The company is also influenced by one of Mr Petrakis’ old mentors from his time studying at Harvard Business School – Robert Kaplan.
“Robert Kaplan, who used to be my Professor, is famous for designing the Strategy Map and Balanced Score Card tool that he eagerly wishes to distinguish from merely introducing a set of KPIs” acknowledged Mr Petrakis. “Having had the chance to study his work first hand, I was very keen to put this tool into play in our own organisation, which we started to do in 2011.
“We created a high level strategy map that related to our business. At that time, we were going through a complete renewal of our fleet and had set specific strategic objectives validating the cause and effect relationship.
“The Balanced Score Card measures how we perform in respect of those strategic objectives. Essentially, it all boils down to the fact that whilst results matter, the way of achieving those results matters most. That was a significant statement for us.”
Fleet renewal programme
In 2010, IHS embarked on a complete fleet renewal programme, ordering newbuilds from both Korean and Chinese yards that incorporated a raft of technologies to boost not just efficiency, but the company’s environmental footprint. By 2012, IHS had disposed of all its aged vessels.
“We have invested in excess of $125 million to have some of the best in class vessels on the water today that we manage prudently” said Mr Petrakis. “We have reduced our carbon footprint across our operations by 20% since 2011.
“We believe that contributing to more sustainable shipping requires that safety and care for the environment be placed at the top of our agenda. This is a pledge that we have made, and is something that we repeat internally, because although it’s nice to hear, it’s better to see that we implement those pledges throughout our operations on a daily basis.”
Investing in these new vessels during what has been a challenging period, particularly for dry bulk shipping, is no mean feat. But Mr Petrakis believes IHS is proof that if you do your due diligence, success can be achieved.
“We very carefully choose our entry points and that does not necessarily entail increasing our exposure when asset values drop if short to medium term revenue fundamentals don’t back the story”, he said. “It is not as simple as one-plus-one equals two when market values drop; we need to showcase that a drop in asset values can be coupled with short to medium revenue fundamentals that make us excited about investing”.
With competition fierce amongst the world’s dry bulk fleet, Mr Petrakis said simply running modern vessels does not allow a company to stand out from the rest.
“The global dry bulk fleet has been significantly renewed and most owners and operators are competing for cargo with quality assets,” he said. “There was a time when competitive advantages could pay off as modern vessels were competing with aged tonnage. During those times, the new vessels were the preferred class for charterers and were paid a premium. But today, predominantly modern vessels represent the default class in the market with older vessels being paid with discount.
“Only new technologies that reduce voyage costs for charterers can be monetised these days and yet again not in full.”
“Where owners have no power over revenue, in this environment, the cost leadership strategy is what can make the difference in both return-on-equity and solvency terms vis-a-vis your peers. Notably, in pursuing this strategy, IHS has managed to maintain vessel OpEx to extremely competitive levels without compromising the quality of service and cutting back on qualitative targets.”
Voicing concerns over industry challenges
With profit margins tight and regulations and demands constantly on the rise, Mr Petrakis said part of the ongoing challenge for owners and managers is forming a holistic industry that works to the sum of all of its parts. On this topic, Mr Petrakis wanted to share his strong opinions on charterers and Rightship.
“Put bluntly, charterers are not paying enough for the services they require of us and their management systems require of them”, he stated. “Is CSR only another pledge or a meaningful way for a company to portray how it will conduct itself in performing its business to society? We fear dry bulk vessels are not getting paid for what charterers have pledged. Volatility remains high with the market lacking strength, making it susceptible to charterers’ short term appetite.”
“When in 2016, vessels on average could not pay for their running expenses, let alone interest and capital repayment, it begs the question how charterers thought that owners at that time would be able to comply with all these requirements going beyond the rules of class and other regulatory bodies; such as higher crew pay, a minimum level of stars in the Rightship rating system, catering to environmental considerations and so on.”
According to Mr Petrakis, Rightship’s rating system “has become increasingly difficult to disintegrate to individual actions and performance and is often affected by factors that are completely outside the control of owners or managers. This gives a lot of leverage to charterers bidding for the vessel and commanding a discount where that discount is not merited. I don’t buy into the notion of predictive risk modelling for shipping, at least the way this is put out by Rightship.”
Mr Petrakis continued: “We have found it is very difficult and time consuming to obtain feedback from our customers following the performance of a charter party when, astonishingly, our customers by definition are the stakeholders the interests of which are mostly vulnerable to substandard service.”
“We’d like this process to be easier, but be it as it may, we have managed to gather adequate feedback ourselves from which to draw meaningful conclusions. Most notably, 80% of IHS customers responded that they are satisfied with the service offered, with 70% stating that they consider IHS a preferred service provider. So although we do get a reasonable amount of feedback which informs our decisions, we would like this process to be easier and more mainstream.”
Ambitious future plans
Looking ahead, Mr Petrakis revealed part of the future vision at IHS is to have an aggregate annual cargo carrying capacity under its management of 10 million tonnes by 2020.
“To achieve that, we require a fleet of about 20 medium sized bulk carriers”, he said. “Our plan is to meet this target one by steadily increasing our own fleet, , two by assuming the management of third party vessels and three by chartering in tonnage.
“That said, this target is not set in stone and is not set in isolation but on the back of certain projections which may or may not play out. The size of the fleet will very much depend on the prevailing market conditions as we move towards 2020.”
Summarising the success of the company over the years, Mr Petrakis said: “I honestly believe that three things have played a significant role throughout the history of this company and the wider group; prudency – that is good and careful judgement every day in our operations; frugality – which describes our low cost structure; and integrity – that denotes the fairness in our transactions.”
He concluded: “The market continues to be saturated in my view, but we are cautiously optimistic that the supply and demand imbalances will soon adjust to healthier levels. It is more about the rate of growth of one versus the other (supply and demand) rather than the balance of the absolute numbers.”