Private Competitor Biting Into Unionized State Ports

Israel Shipyards received a permit to operate in 2007, near the Haifa port. Since then, its market share has jumped to 20%, at the expense of the state-operated port.

Four years after the first private company started handling sea port traffic, it's clear why the state port employees object to further privatization - the private competitor is slamming them.

Israel Shipyards received a permit to operate in 2007, near the Haifa port. Since then, its market share has jumped to 20%, at the expense of the state-operated port.

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The employees at state ports belong to one of the country's strongest unions, and are among the country's best-paid workers as a group.

In May 2007, the state announced that it intended to open its ports to internal competition by building two privately-operated platforms at the Haifa and Ashdod ports. But the plan roused fierce opposition from the port workers, who blocked it.

However, three months later, Israel Shipyards received a permit to operate the country's first private port, at the Kishon Port. The Transportation Ministry found that the private port doubled its shipping volume in 2011 versus 2010, to 533,000 tons of general cargo. Meanwhile, only 405,000 tons passed through the nearby Haifa port last year. General cargo includes goods that do not arrive in shipping containers, including cars.

Israel Shipyards also unloaded about 500,000 tons in loose goods such as chemicals, which means it moved a record 1 million tons of goods last year. Another 148,000 tons of goods - namely, vehicles - passed through the state-owned Eilat port.

Most imports - 66% - came through the third state port, Ashdod. Some 1.8 million tons of goods passed through Ashdod, not counting vehicles.

Total sea imports increased 6.4% versus 2010, to a total of 3 million tons.

However, the two big state ports - Haifa and Ashdod - saw their volume drop 8.5% last year.

Israel Shipyards was created in 1959 as a government company, planning and building ships at the Kishon Port in the Haifa bay. In 1995, the company was privatized, and was sold for NIS 42 million to Shlomo Shmeltzer and Shlomi Fogel's Sco-Car, Samy Katsav's Nazka and Clal Industries.

In August 2007, after years of trying, the company received written permission to use its dock space as a private port, although it was limited to unloading no more than 5% of the country's total sea imports. It worked via its 900-meter long wharf that could serve ships of up to 5,000 tons.

Three years ago, it created a subsidiary responsible for its port operations. It wooed Haifa port customers, offering more flexible hours, direct storage and shipping, and lower prices.

It sought to conquer the market for general cargo, since this was a less important component of the large ports' operations; the latter focused more on shipping containers.

Most of the private port's operations involve unloading, not exports, which are still largely handled by the nearby Haifa port. Israel Shipyards is also dependent on the Haifa port for services including navigation, and is yet to unload shipping containers at its dock.

Its competitors argue that it cuts costs by hiring subcontracted workers.

Others argue in response that skilled employees at the private port earn wages similar to their counterparts at the state-owned ports, so this isn't the source of the former's competitive prices.