While the reefer sector has avoided the catastrophic drop in business felt by container carriers handling “dry” cargoes, rates and volume for refrigerated shipments have dipped this year.
However, rates and volumes of refrigerated and frozen foods are expected to rebound in 2010. Tied to that growth is a shipper’s nightmare: Refrigerated containers are expected to be in short supply worldwide.
Breakbulk and container carriers anticipate growth in refrigerated cargoes next year, with higher volumes already apparent in some markets.
“It’s been a pretty lousy few months; everybody has been affected by the global downturn,” said Howard Posner, general manager of Seatrade USA, the U.S. general agent for Antwerp, Belgium-based refrigerated shipping giant Seatrade Reefer Chartering. “Business has been quiet. In the specialized reefer industry, we haven’t been hit like the dry trades, but it has been quiet.”
The refrigerated side of the container sector has been similarly affected, according to Bill Duggan, vice president of North American refrigerated services for Maersk Line. Volumes have dipped, although they have not been hit nearly as hard as the dry container business.
Duggan said rates have been more of a problem than volume. “Rates have dropped too much,” Duggan said. “On a percentage level, not as much as dry, but rates especially on east-west services have dropped to levels we can’t sustain.”
While shippers may have enjoyed the lower rates this year, they won’t appreciate next year’s consequences. “You can see it with all carriers,” Duggan said. “Overall, rates have been depressed in 2009, and in 2010, in order for areas of the world to get the assets they need, rates will have to climb to pay for repositioning and other costs.”
For the reefer sector, the “major downside” to the year’s revenue is that carriers did not have money available to invest in new refrigerated containers. “We expect business to increase next year, and we will see a significant tightening of equipment. Very few new reefer containers were purchased, so as demand increases, it will be a significant challenge to meet that — particularly in the Southern Hemisphere in the first and second quarters next year.”
The world reefer pool is expected to be smaller in January than it was at the beginning of 2009 because carriers retired more boxes than they purchased. “Equipment is regularly retired,” Duggan said. “They get old, they fail and the high cost of maintenance and repair means they get retired.”
Rates in the trans-Pacific have been low, especially for westbound shipments of meat and poultry. “All the carriers have been scrambling to get at least reefer on ships,” he said. “The return on a reefer unit is better than dry so it means right now everyone wants to be in the reefer business, even companies that haven’t traditionally been in that business.”
Duggan predicted the biggest area of growth would be in the banana business as container carriers continue to win business that has traditionally been shipped on specialized reefer vessels. “The banana business is somewhere between 25 and 30 percent of all refrigerated cargoes moving, but the container share has traditionally been in the 4 to 5 percent range. That’s changing,” he said.
While business hasn’t boomed for breakbulk carriers, there have been no massive ship lay-ups. “In our company, we have some 140 vessels around the world, and there are only four in lay-up,” Posner said.
He credited that to Seatrade’s policies and the fleet’s flexibility. “We have newer vessels than some specialized reefer carriers, and we have vessels in all sizes so we have the flexibility to participate in all markets,” he said.
Posner said business has picked up in the past few weeks. “There is a lot of fish moving out of Scandinavia to Africa, bananas are moving out of Ecuador, and the Moroccans and Spainards are starting to ship clementines,” he said.
Part of the increased volume is simply the traditional business cycle. “Summertime is a low season for the reefer industry,” Posner said.
Although the breakbulk industry knows it is facing increasing competition from container lines, he said there is no whole rate decreases available to shippers.
“We have to position vessels, and fuel costs are going up again,” he said. “If we are not going to get minimum returns on a voyage, we don’t do it.”
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