From 'new kid on block' to big kid on waterfront

THE BALTIMORE SUN

A little-known ocean carrier cobbled together with secondhand ships, the Mediterranean Shipping Co. was passed over when Baltimore's Seagirt Marine Terminal was shopping for its first tenants in 1988.

Maryland transportation officials were reserving the $250 million, state-of-the-art terminal for the world's top cargo carriers in hopes of scoring a blockbuster deal that would reverse the steady loss of longshoremen jobs to Hampton Roads, Va.

It wasn't until Gov. William Donald Schaefer intervened that Geneva-based Mediterranean Shipping was invited to become the terminal's first tenant in September 1990.

As it turns out, the port had landed a big one and didn't know it. Twelve years after Mediterranean began calling at Seagirt, the company has grown into the world's second-largest cargo carrier. The enigmatic, privately owned line's penchant for loyalty to ports that other cargo carriers have left behind has defied skeptics and been a boon for the blue-collar workers Schaefer and others were courting when they decided to invest hundreds of millions of dollars in new port facilities.

"We were the new kid on the block," said Capt. Lorenzo Di Casagrande, a Mediterranean vice president and head of the line's Baltimore operations. "So nobody believed in us."

They do now. Mediterranean is by far Seagirt's largest customer, moving nearly 94,000 of about 500,000 20-foot cargo container units that moved through the port last year. That was a 42 percent increase from the previous year, and Di Casagrande hopes to top 100,000 boxes this year. It is the first - and only - steamship line serving the port to top 1 million tons of containerized cargo in a single year. The last time a carrier approached that figure was in 1984.

The company's sudden growth in Baltimore came shortly after it signed a 10-year contract to continue calling at Seagirt - a longevity commitment that is rare among East Coast ports. The deal, announced in March 2001, helps ensure that the city will hang on to its remaining container business, which has been flat for the past 10 years despite intense marketing.

"Here on the East Coast, ship owners like to play one port off another," said James J. White, executive director of the Maryland Port Administration, which oversees state-run marine terminals. "But when they [Mediterranean] make a commitment to you, they're with you for the long term."

That loyalty is important because containerized cargo is the port's biggest revenue generator, and its toughest sell. To be competitive, container carriers rely on speed and low operating costs, something Baltimore can't offer because of its distance from the ocean.

Mediterranean takes a different approach, continuing to call at less congested ports that have strong local markets and a limited amount of direct service from major carriers. The company has gained market share as other shipping giants like Evergreen and China Ocean Shipping Co. have scaled back their service to the port in recent years.

"They are important to ports like Baltimore and Boston in that they don't follow the normal routine of calling the same three ports on the East Coast and feeding the rest [with barges]," said Michael Leone, director of the port of Boston.

The company brings four ships a week to Baltimore, carrying everything from Heineken beer to Chrysler auto parts. That service connects the city to ports in Northern Europe, South Africa and both coasts of South America. Cargo from the Far East travels through the Panama Canal and is unloaded at Mediterranean's hub in Freeport, Bahamas. From there, it is transferred to another ship and brought to Baltimore.

"There are very few markets now that they don't have service to," said John Fossey, a container shipping analyst with Drewry Shipping Consultants in London. "They are truly global, and it's really just been in the last four years that that's happened."

The company's pace of growth is increasing despite a glut in global shipping capacity and low freight rates. It has recently taken delivery of 10 containerships that are among the biggest in the world and has orders for several more. The vessels, which primarily serve the Far East and Europe, can carry up to 6,700 20-foot containers each. When the new ships are finished, Mediterranean will have a fleet of 195 vessels.

"One of the things they've done recently is build a lot of ships, and they've never done that before," said Peter Shaerf, senior vice president of American Marine Advisors Inc., an investment banking firm that specializes in the maritime business. "They are a serious player, for want of a better phrase."

Mediterranean's global ascent began with one ship and a family seafaring tradition that stretches back 300 years. Gianluigi Aponte, son of a ferry service operator in Naples, Italy, moved to Geneva and founded Mediterranean in 1970 by raising $5,000 in cash and $275,000 in credit to acquire a used ship, which he put to work in Northern Europe and the Mediterranean.

One ship became two after Aponte began serving Africa and the Middle East. With freight rates favorable and costs low, he expanded by plowing profits back into the company, fueling the purchase of additional small, aging ships cast off by major competitors.

"They've built their business by buying secondhand ships and being able to undercut the market by having lower capital costs than everyone else," Shaerf said.

Mediterranean was a relatively minor world player when it began serving the U.S. East Coast in the mid-1980s. Its first run brought it to New York, Norfolk and Baltimore, where the company originally set up camp at Locust Point.

A relative newcomer to the market, Di Casagrande remembers having to work hard to establish credibility with the port community and its customers. A charismatic captain with a thick Italian accent, Di Casagrande worked long days and slept on a couch in his office while Mediterranean was getting established.

In the early years, he often fought perceptions that his employer had connections to the Mafia, a rumor that analysts say might have been linked to the company's Italian roots and its tendency to keep financial details private.

Italian seafarers continue to dominate the carrier's officer ranks, as well as its executive offices. Di Casagrande graduated from the Italian Maritime Academy the same year as Aponte, and the line's president, Nicola Arena, also was a classmate.

"We all come from the merchant marine ... we come with that kind of pride," Di Casagrande said. "If something happens to a member of the family, we all help. We are very close."

Analysts say the maritime background of its executives might explain why Mediterranean has remained true to its roots as a traditional ship operator while its major competitors have moved aggressively into door-to-door logistics and other transportation-related services. In keeping with its reputation as a maverick in the industry, the company has all but shunned alliances with other carriers, which often charter space on each other's ships in order to cut costs and boost revenue.

"They are a very traditional ship-owning company," said Fossey, the London analyst. "They're run by mariners, and mariners understand the running of ships, whereas a lot of the companies in the business these days are run by professional business people."

Di Casagrande often conducts business with customers from his regular table at Boccaccio's restaurant in Little Italy, a favorite haunt for many of the power brokers in Baltimore's maritime community. The company's organizational structure has few layers, with local managers having wide authority to make strategic decisions.

Aponte's tendency to empower managers means decisions come quickly. It took less than two months for White and other state officials to renegotiate Mediterranean's contract with the port. Negotiations with other carriers have been known to stretch on for up to a year or more.

"I find dealing with [Mediterranean] very refreshing," White said. "They let you know where you stand. There's no gray."

Aside from its recent purchase of new ships, analysts don't see Mediterranean veering substantially from its 32-year-old strategy of organic growth coupled with lean management.

"They have their own agenda," Fossey said. "It's an incredible story. The company is 30 years old, and it's the No. 2 liner in the world."

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