Israel Corp. holding Zim Integrated Shipping Services Ltd. faces another challenge as the shipping industry continues to suffer from the global recession.
Israel Corp. holding Zim Integrated Shipping Services Ltd. faces another challenge as the shipping industry continues to suffer from the global recession. German insurance giant Euler Hermes informed suppliers last month that it will no longer underwrite deals with Zim.
The deals are primarily fuel supplies to Zim. Reportedly, Euler Hermes notified BP, Chevron-Texaco, and other energy companies.
Credit insurance is not a requirement for fuel supply contracts in the shipping industry, but the move does point to a higher perceived risk level for Zim, which is expected to increase the pressure on the firm.
Industry sources note that Euler Hermes decided to cut credit insurance to the shipping industry in general, with Zim being one of the first, but not the only, firms to be affected. According to those sources, the fact that Zim is backed by the Ofer family and by Israel Corp keeps the company in a good position relative to its rivals.
Zim responded to the report saying, "To the company's best knowledge, in light of the economic conditions in the shipping sector, Hermes is reconsidering the whole shipping industry. It should be emphasized that additionally, not one of Zim's suppliers has reduced the credit to the company."