Commentary: Paying the Right Price for Reefer Service

Food shippers who have been warned of a coming equipment shortage should be cheered by a new report that shows industry investment in refrigerated containers at an all-time high.

According to maritime research analyst Andrew Foxcroft, the global reefer box fleet expanded 13 percent last year, and he expects it to grow another 10 percent this year.

Shippers shouldn’t expect any fire-sale pricing based on a capacity glut, however. Foxcroft says the reefer box fleet is growing as market demand for the equipment grows.

What isn’t growing, according to Soren Skou, head of Maersk Line, is financial compensation to carriers for the expensive investments. Skou has been vocal in telling shippers they should get ready to pay more to ship refrigerated goods. Not only are the containers themselves four times as costly as a dry box, but they’re also more expensive to operate and maintain. In his view, current rate levels just don’t offer an acceptable return.

So, Maersk has put shippers on notice. Reefer rates will increase, and until the returns are acceptable, the carrier that handles more reefer loads than any other won’t be buying more equipment.

Because Maersk owns an estimated 25 percent of the global fleet, the decision to halt investment could have a major impact on capacity and service levels.

Or not.

One cynical e-mail correspondent notes Maersk has a long history of first aggressively trying to gain market share from other container carriers by lowering rates and then doing a yo-yo rate correction a little way down the road. Another skeptic noted in an e-mail that Maersk was not only targeting market share from other container lines, but from specialized breakbulk carriers as well.

A number of breakbulk reefer vessels have been scrapped in recent years as lower rates combined with higher fuel costs and made the vessels too expensive to operate.

Shippers in a highly competitive food market are happy to take advantage of lower rates. But they aren’t at all happy with the cuts in service that go along with bargain basement rates. “We talk about whether or not we can afford to go with some of the carriers that have the lowest rates,” one shipper said. “Customer service now refers only to getting slot space and equipment. If there is a problem with a shipment down the road, we hear from a lot of carriers that the salesman we’ve worked with can’t do anything to help.”

Help with crisis management is what shippers want and are willing to pay for, the shipper said.

The real question: How much are they willing to pay and what are carriers willing to provide?

Contact Stephanie Nall at stephnall@aol.com.
 

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