Intermarine CEO Discusses Operations, Ex-Im Bank Financing, Part 1 [INTERVIEW]

Andre Grikitis intermarine shipping

Part 1 of an exclusive gCaptain Interview with Intermarine’s CEO, Andre Grikitis, and CFO, Michael Dumas.

By Jack Mylott, Partner, Flagship Management

JM: Andre, Michael, thank you for joining us today.  Let’s kick this off with an overview of Intermarine and your operations. 

AG:  We are the largest break-bulk project cargo carrier based in the US.  Our headquarters are in New Orleans, and our largest office is in Houston where the majority of our clients are in a radius of 100 miles.  We have a 90-acre industrial terminal in Houston, which is the busiest project cargo terminal in the United States.  At that facility, we have rail siding, truck delivery, barge docks, and mobile cranes.  From there we operate about 250 voyages per year, primarily within the Americas and Latin America.

Venezuela, Trinidad, Columbia, Ecuador, Peru, Chile, Suriname, Guyana, Argentina, Brazil are our core and we have a high frequency of sailings and strong market share in all of those trades.  We carry break bulk, project and heavy lift cargo, and we do have some container capability for projects.

Industrial Dream intermarine
Image courtesy Intermarine

Our core fleet has 3 generations of vessels.  Our first series were 2×200 for a combined of 400-ton lifting capacity.  Four of those now are US-flagged, followed by another similar ship that was only really upgraded and tweaked to a 2×250… there are 6 of those.

Now the larger version, a new class we dubbed the F-class, has been specially configured for being able to carry very large and over-dimensional pieces, and has no line-of-sight issues.  These vessels have a capacity of 2×400-ton cranes for an 800-ton lifting capacity.  They are the largest in our fleet and are 14k DWT.   One of them is operating under the US-flagged fleet for a total of five US-flagged vessels.

The EPC companies [Engineering, Procurement, and Construction], Oil, Gas, Mining are the industries where a majority of our clients are operating in.  We have contracts with many of the suppliers to these industries, and as projects are built, we supply the infrastructure.

We do the same thing on a global basis.

We traded actively in the trans-Pacific trades to Asia and we’ve had services on an intra-Asia basis from north Asia (Japan, Korea, China) into India and the Persian Gulf region.  We trade with both Foreign-flagged and US-flagged assets and have a high concentration of heavy lift vessels between 400 and 800-ton lifting capacity.

The main supply of cargoes for this comes from Ex-Im Bank-financed lending to buyers of US goods.

I think it’s well known that the president has established a goal of doubling US exports in his inauguration speech.  Ex-Im, in fact, has turbo-charged its lending, which I think has been particularly successful in the current environment.  They have more than doubled their lending over the last two years.

They continue to grow, and we’ve grown with them.

I think from the point of view of a successful government program, the bank doesn’t cost taxpayers anything, produces jobs, manufacturing jobs, and jobs on the waterfront that go with moving the cargo.  When you consider that we’ve more than doubled our fleet with the expansion of Ex-Im, there is a direct relationship there, and there are good-paying seagoing jobs associated with this program as well.

From a point of view of anybody I think reading an article of what has been working, and frankly what could use more turbo-charging, in my opinion, Ex-Im Bank lending has been extremely successful.  My view is that program should be expanded.  Regrettably, the current Chairman, Fred Hochberg, who’s been very proactive and engaging, has not been able to add sufficient staff to promote the lending to the level that I think they could.  Simply because, like other government agencies, he’s constrained by budget issues.

Our view is that the government should be prudent and somehow working out exceptions to some of these because this is certainly a non-partisan viewpoint about what works and exactly what the country needs.  That is a very important part of what we see as a potential growth area for our economy and our business.

Our services are essentially customized to fit the needs of our clients.  Meaning while we’re consistent in our sailings, the same ship does not sail the same route, or call on the same ports on a consistent basis.  We are tailoring and customizing voyages to optimize client’s needs.  The focus of our business is not about the hardware.  Essentially, while we obviously need and maintain a core fleet of vessels, and we are normally operating 25 plus vessels at any given time, our business is a service business and what we aim to do is to really satisfy the needs of clients and make ourselves useful to their transportation needs.  The fact we’ve been able to provide that sort of expertise and consistency over time has led to what I would call a very strong brand.

What we provide is certainty and reliability in a business that of course has a lot of moving parts, and for many of the projects that our clients are involved in, the lowest cost in transportation does not necessarily end up being the best value.

The value of projects getting up and running on time, or keeping running, is much more important than some difference in freight.  What we try to do is manage our schedules to ensure that we are delivering what we promised, and I think that having done so consistently has led to a high degree of client retention.

And it’s not just A-to-B transport…

We provide other services as required.  What’s important to our clients, among other things, is that they also want timely, accurate documentation because everything may go very well, but if they can’t bank their document on time, then people are obviously not going to be happy.  Everybody in our company is involved in the cargo life cycle in some way.

We maintain a very strong corporate culture which I think is evident to the clients, and considering the kind of turmoil that the shipping markets are often in, I think that stability, consistency, and reliability are really the important ingredients for us to continue to grow and develop our business further.

JM: You touched on one or two things as far as what is sparking some of the growth such as the Ex-Im Bank financing.  What are the key factors that are driving the requirements for the services you’re offering?

AG:  On a macro basis, there are a few things.  Keep in mind that the Ex-Im are cargoes only emanating out of the US.  Clearly multi-nationals today operate a lot differently than they did.  Where previously, a particular supplier of cargo would be quoting a cargo out of one area, today, the multi-nationals may quote that product out of 3 separate locations.  You may be quoting a cargo into someplace in Brazil, and it may be produced in Europe, the US, India, or China.

So, the complexity of our business has clearly expanded over time, and there are a number of factors that influence that.  The macro picture on how companies are doing business is a big part of that.  Ex-Im is an important US initiative, if you will, but in terms of overall cargo movement on a global scale, it’s certainly not that large.  You’re talking about a small number of vessels being occupied with Ex-Im, the US fleet of course is not large, shipping is not a valued industry in the United States.  It’s clearly not been in the forefront really on any level, so it makes our business more complicated to communicate and to have others understand the value of it.

On a global basis, you’re talking about the macro picture, where infrastructure development continues in more places than it’s ever taken hold before.  Whereas maybe 20 or 30 years ago, you would have the oil patch building in the Persian Gulf, and perhaps West Africa, but today, you have projects really all over the world as all the Asian countries continue to build infrastructure.  Certainly it’s ramped up in the Americas on a continuous basis as well.  West Africa has expanded, so there is more activity on a much larger scale as the world industrializes.  Of course, to industrialize, it comes back to the raw materials required and you see the booming economies of places like Brazil and Australia who are involved in the producing commodities required for manufacturing the materials required for further industrial growth.

Again, I think the industrialization on a worldwide basis is requiring more carriage of specialized cargoes and I think that’s driven the multi-purpose, heavy lift sector over the past decade.

Intermarine CEO Interview Part 2: Project Cargo, Newbuilding, Wind Turbines, and the Heavy Lift Club..