By Alex Binkley
After 35 years in international shipping, Ken Bloch Soerensen says with a chuckle he sought the post of President and CEO of Algoma Central “to learn a new trade.” The soft-spoken Dane spent the first few months after succeeding Greg Wight on April 1 in low-profile mode as he became familiar with Algoma’s operations and studied the Great Lakes-Seaway trade.
Algoma appealed to him because “it’s a well-run company with a strong foundation,” he says in an interview. He’s looking for efficiencies and other steps to further strengthen the company’s bottom line. Algoma has created a strong franchise over the years that has given it “a solid global reputation as the foremost provider of marine freight services in the Great Lakes and I anticipate building from that base into new markets.”
He encountered no surprises during the learning curve. “Some expectations were met; some were exceeded. Clients, suppliers and regulators were all extremely welcoming.”
While there are distinct differences between the Lakes and international shipping, his big concern is that the domestic business has not been growing as ocean freight has. Compared to ocean shipping, the Great Lakes trade is “a lot more consigned market with the same kind of clients and contracts. It’s mostly short haul with lots of port calls.”
The Great Lakes trades were built on the heavy industry and manufacturing that was the hallmark of the region, he says. “We don’t have a growing market now and we need to encourage other businesses to spring to life. We need to secure more long-term contracts.”
The new markets he wants to steer Algoma into include more shipping outside the company’s home base in the Seaway-Great Lakes system to make better use of the company’s shipping capacity. One area that he wants to explore is the possibility of container service on the Great Lakes. He isn’t yet offering a specific proposal although like other supporters of the idea, he’s watching how well the Cleveland-Europe Express performs.
In addition to his goals for Algoma, he has developed several themes he plans to pursue in hopes they will make the maritime sector a bigger player in Canada. One is to transition the St. Lawrence Seaway to year round operation so the carriers can seek new business.
He would also like to see a consolidation of the 13 organizations currently speaking for shipowners, ports and maritime shippers in Canada. “It’s not a very big place and there are too many associations in the same business to make it truly effective.” He bases this idea on his experience as the Executive Director of the European Liner Affairs Association in Brussels, representing the industry on regulatory matters in the European Union representing top shipping lines.
Before taking the helm at Algoma, Soerensen worked in a variety of jobs and locales. His experience includes 18 years at A.P. Moller/Maersk where he held the position of General Manager in several of Maersk’s global operating units. After that he worked as CEO of Swiss Federal Railways Cargo, and then on container shipping in the Asian, North Atlantic and Middle Eastern markets. He served as CEO of United Arab Shipping Co. from 2005 to 2009 as well as most recently as Managing Director and Partner in IPSA Capital Ltd.
Shortly after he arrived, Algoma announced the purchase of the 2009-built Gypsum Integrity along with the decision to order two additional 650-foot handy sized self-unloading bulk carriers from 3.Maj Brodogradiliste d.d. Shipyard, which has been building ships in Rijeka, Croatia on the northern shores of the Adriatic Sea since 1892. It is a subsidiary of Uljanik d.d. of Croatia. The Croatian yard is expected to deliver the vessels in 2017, and “will serve a range of customers with particular focus on salt and aggregates industry shippers.”
Algoma had been looking for a company to replace Nantong Mingde Heavy Industry Co., Ltd. of China as the builder of its Seaway-sized Equinox Class bulk carriers. The Chinese firm had entered a supervised restructuring process before it could build the last four Equinox ships that Algoma had ordered. The first two were delivered during 2014 with the rest expected this year or in 2016. Earlier this year, however, Algoma advised the restructuring administrator of the shipyard that it doubted the shipyard could complete the work and that it would not take delivery of the four vessels. Soerensen hopes to announce before too long a new builder for the four 740-foot ships plus an additional one. He notes the three handy sized ships plus the five Equinox vessels will bring Algoma’s committed investment in fleet renewal for the domestic drybulk fleet to more than $560 million.
Algoma Integrity will eventually be placed in the international pool of self-unloading vessels in which Algoma has other ocean-going ships participating, Soerensen says. “The specialized service needs of certain of our customers require the size and type of vessel that Algoma has consistently provided.”
Soerensen said the delay in the delivery of the five Equinox ships is frustrating for Algoma because it will incur extra expenses in keeping five older ships working through two more seasons. It hopes the new ships will start arriving in late 2017 through 2018.
The new ships will deliver lower operating costs and greater capacity for the company, he said. “We’re not expanding our fleet. We’re replacing existing ships on a one for one basis. The longer it takes, the more it costs us. We would rather have the new ships sooner than later to avoid the additional expense.”
He takes the event in stride saying that delays in ship deliveries happen all the time.
Algoma reported revenue of $184.4 million for the six months ended June 30, which was $5.6 million lower than for the first half of 2014. The product tankers suffered a revenue decline of $6.6 million while the ocean shipping dropped $5.5 million. He said the result is not unexpected in a cyclical business like shipping, and can turn around out just as fast. Domestic dry bulk revenues increased by $4.4 million. The tankers had less work while the company benefitted from lower fuel prices.
The big question mark for the rest of this shipping season is how much Prairie grain will move through the Seaway-Great Lakes given the weather crimped Prairie harvests. As well, will the increased interest in the waterway from state and provincial governments along with Quebec’s Maritime Policy bring more commerce to the system? Like his counterparts in the shipping world, Soerensen will be working hard to make it happen
Postscript: On September 10, Algoma announced that it is has signed conditional contracts to build three 740 foot Seaway Max self-unloading bulk freighters to join the Company’s Great Lakes – St. Lawrence Waterway dry-bulk fleet. These contracts, which are with Uljanik d.d. of Croatia, replace three of the contracts with a Chinese shipyard that were cancelled earlier this year. The agreements are contingent upon delivery by the shipyard of acceptable security for the construction instalments required under the contracts.
“Our experience with the Uljanik Group on the Equinox 650 Class project has given us confidence in the Shipyard’s ability to deliver high quality vessels on the agreed timelines”, said Ken Soerensen. “Our Equinox project has faced significant delays as a result of the financial problems encountered by Nantong Mingde shipyard. Working closely with Uljanik, we are confident in the continuation of Algoma’s fleet renewal project.”
The first vessel is scheduled for delivery in early 2018 with the balance of the ships delivered by the end of that year. Algoma is continuing discussions with other parties on further fleet renewal opportunities.