Posted 10.7.13Meet Weatherhead School of Management alumnus Mark Barker, MBA '03, President of Interlake Steamship Company
Mark Barker, MBA ’03, is president of The Interlake Steamship Company, which is celebrating its centennial this year. We caught up with him to learn about his career path and current challenges and opportunities in the shipping industry.
W: The Interlake Steamship Company is a family business. How did you decide to get into the business?
MB: The company has been around for 100 years this year, and it has been a family business since 1986. When my dad retired in the mid-’80s, the company that owned Interlake was selling the ships. My dad bid on them and was successful in buying Interlake. He took the company private in ’86-87.
I grew up around the ships listening to my dad talk about them, and I’m a water-oriented guy. As a junior in high school, I had to figure out where I wanted to go to college. I thought, “Well, what do I want to do in my life? I’d like to figure out if I’m interested in going to sea and working on ships.” So I applied to a school called the State University of New York Maritime College or SUNY Maritime. The part I graduated from was an engineering school that also gets you a U.S. Coast Guard license to operate ships.
So over four years in college, all I did was learn how to operate ships—and everything else you’d want to know about them! Then I sailed as an engineer aboard ship in several different capacities and eventually came ashore and oversaw the repair of ships. I sailed for Interlake as well as others.
W: Then you decided to go back to school for your MBA.
MB: Being a shore-side engineer in an operating fleet is a very demanding job, and there are a lot of times when you’re gone for an extended period and working at all hours. Luckily, we are in a family business, so I had the opportunity to exit the company and go for the full-time MBA in 2001. When I graduated, I re-entered, but more on the financial side.
W: Do you miss engineering?
MB: We operate very large, very capital-intensive assets, so I do still get out on the ships often. Our largest cost expenses in the business are maintenance and repair, fuel, and crew. Most of maintenance and repair is engineering, and we’ve done some exciting projects here at Interlake that are very engineering-focused. So even though I oversee it all, I still spend probably too much time in engineering!
W: The Plain Dealer reported that you are converting some of your ships to run on liquid natural gas (LNG).
MB: We have nine ships that are currently active. We don’t own one of the nine—we manage it—but out of the nine we are looking at converting seven of them.
W: What do they currently burn? Coal?
MB: No, in the old days, a hundred years ago, they burned coal. Currently, our fleet burns either diesel oil or residual oil, a heavy diesel oil.
W: Will the carbon emissions from your ships be reduced by converting to LNG?
MB: Yes, but the focus is on a couple different things. We’re not only focused on carbon, but also on sulfur and nitrogen oxide. So we’re looking at a cleaner fuel from the point of view of multiple emissions. The engines we’re putting in are dual-fuel engines, so they can actually burn both diesel and natural gas. Eventually, we will be going to an ultra-low-sulfur diesel, but in this case, with natural gas, we’ll take it to a further level of almost no sulfur. Nitrogen is a product of combustion, but again, with natural gas we’ll be lowering our nitrogen oxide considerably. And then the fact that natural gas has one less carbon molecule in it than most hydrocarbons means that there will be a significant reduction in carbon dioxide.
W: Who are your customers? You are like the UPS of iron ore, right?
MB: We carry mainly free-flowing bulk products, so anything that can freely flow with gravity we can carry. The three main cargoes that we carry are iron ore, coal, and limestone or aggregate. Iron ore is the raw material for steel making. Some of our big customers in the iron ore business are Cleveland Natural Resources; Arcelor Mittal, which also has a steel mill in Cleveland; Severstal in Dearborn, Michigan; and AK Steel, based out of Ohio.
There are two types of coal: metallurgical coal for steel making and steam coal, which is used for power generation. Limestone or aggregate rocks are again used for steel making as well as construction, and as scrubbing stone for flue gas cleaning. Then there’s some grain involved and other miscellaneous cargoes that we can carry. We ship about 20 million tons of raw materials a year, and that’s in about nine months. Our biggest ship can carry 68,000 tons per trip, and if you loaded all of our ships simultaneously, drove them down the lake and discharged them, we have a fleet capacity of about 370,000 tons per trip.
W: The Plain Dealer also talked to you this year about drought conditions and mild winters resulting in low water levels in the Great Lakes. The article said that companies like yours haven’t been able to load their ships to their normal capacity.
Yes, there was a great NBC Nightly News piece on us as well. There are two issues going on in the Great Lakes: One is low water levels from the drought. They’re starting to recover, but is it a long-term or short-term recovery? We don’t know that yet. The other issue is inadequate dredging. Because these are federal channels—like interstate highways on water—much of the money for dredging flows from the U.S. Army Corps of Engineers. Right now, we have $250 million worth of backlog dredging that needs to be done. Our ships are designed to be loaded to 29 feet; the authorized channel is 27 feet, and this spring we carried at 25 feet. For every inch our ship loses, we don’t carry 250 tons. It’s like taking a semi-truck and filling it three-quarters full.
W: That reduces the efficiency of each trip.
MB: And it affects our customers. We operate a nine-month season, because in the winter time the Soo Locks in Michigan, a critical piece of infrastructure, shut down due to winter ice. So all our customers need to get their inventories in during that nine-month time period.
On top of that, our operating costs are the same, whether you put 10 tons or 100 tons in. Just like driving a truck down the road, it’s about the same cost full or empty. So at the end of the day, the cost to our customers starts increasing, and that’s input cost to steelmakers that serve the automotive industry. That’s why we need to maintain our waterways and infrastructure: so we can ensure our customers are getting the lowest-cost transportation so that they can remain the most competitive.
W: What don’t people know about the shipping industry? Do lots of people think your ships run on coal? What do you find yourself explaining over and over?
MB: I think there’s a couple points where the shipping industry doesn’t get recognized. First, everyone knows what a truck or a rail car is and what they do, because you get stuck behind them in traffic and at railroad crossings. But in the Great Lakes, our industry alone ships over a hundred million tons of raw materials a year. And most people don’t realize that or even see the impact of us. That’s the beauty of marine transportation: We come in, we unload, we go about our business and we leave—and you’re not worrying about accidents and road wear. We’re safe, we’re low-impact to society and we are actually the greenest form of transportation: I can move one ton of cargo 600 miles on one gallon of fuel on a ship.
A lot of people look at Lake Erie, for example, and think it’s a nice body of water and fun to swim in. But it plays a critical role in U.S. steelmaking and national security, because the majority of iron ore used in U.S. steelmaking—raw steel, not recycled but brand new—is delivered via the Great Lakes. The Great Lakes are home to 50 % of U.S. steelmaking, 55% of all U.S. manufacturing and 70% of all auto manufacturing. And a lot of that is because of the low cost of transportation and the ease of sourcing raw materials. So we spend a lot of time trying to explain the importance of the Great Lakes not just as a source of fresh water for the U.S. but also to transportation and manufacturing.
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