A major commercial dispute has erupted between Israel Corporation (TASE: ILCO) subsidiary Zim Integrated Shipping Services Ltd. and China Shipping Container Liners Co. Ltd. (HKSE:2866; Shanghai: CN). Sources inform ''Globes'' that China Shipping is accusing Zim of breaching a cooperation agreement on routes between Far Eastern and European ports. Although China Shipping initially threatened to go to court, the case will probably end up in international arbitration.
In September 2008, Zim and China Shipping reached a commercial understanding under which Zim would lease capacity on China Shipping container ships on routes between Chinese and Northern European ports. Zim was due to lease 4,000 TEU (twenty-foot equivalent units) on China Shipping's weekly service, on which it operates eight large container ships.
Industry sources estimate the value of the agreement at $100-120 million.
Shipping industry sources believe that one reason Zim decided to withdraw from the agreement was the drop in demand for Far Eastern trade. In addition, Zim's financial situation is deteriorating; it lost $199 million in the first quarter of 2009, after losing $330 million in 2008 as a whole.
During 2008 and early 2009, Zim greatly expanded its collaboration with other shipping companies as part of the Grand Alliance on shipping routes between Asia and the US, as well as on routes between the Mediterranean, Europe, and North America.
Published by Globes [online], Israel business news - www.globes-online.com - on May 6, 2009
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