Exporters anxious to locate equipment can breathe a little easier: Container carriers and leasing companies are on track to purchase a record number of new refrigerated containers this year, according to a new study by Drewry.
During the first half of 2011, about 100,000 containers were ordered, a level equal to all of 2010, according to Andrew Foxcroft, lead analyst for Drewry Maritime Research’s new report, “Container Census — Survey and Forecast of Global Container Units.” He expects the number to hit 150,000 units by year-end.
“The reefer market was not hit as hard as other market segments,” Foxcroft said. “Even in 2009, about 50,000 new refrigerated containers were ordered globally.”
However, that meant the global fleet count increased by only 12,000 reefers, because even during a recession carriers continue to retire older reefer units because of higher maintenance costs and reliability problems.
In 2008, during the heyday of refrigerated food shipments from the U.S. and many other markets in the world, container manufacturers turned out about 115,000 units, nearly equal the number produced in 2007, Foxcroft said. About 90 percent of all reefer boxes made in recent years have been 40-foot high-cube units.
Foxcroft said in 2008, with the purchase of 115,000 units, the fleet size increased about 75,000 units to 900,000. “The poor economy in 2009 meant production was more than halved, with only 50,000 built and a fleet addition of 12,000,” he said.
Ownership shifted in 2009, too.
“Traditionally, the container lines have wanted to own and control their own reefers,” Foxcroft said. “Leasing companies in the past stuck to dry boxes, and most avoided the reefer market.” In a typical year, the ratio of new boxes would be 70 percent sold to carriers and 30 percent to leasing companies.
In 2009, that flipped, with leasing companies accounting for about 60 percent of the new reefers. “During 2009, most carriers were not investing in equipment,” he said. “APL, CMA CGM, Hapag-Lloyd and OOCL weren’t in the market. Maersk, Hamburg Sud and Chiquita were fairly active then, but the leasing companies were more so.”
Even when new production recovered to 100,000 units in 2010, leasing companies accounted for 40 or 50 percent of the total, he said, a level he projects will continue throughout 2011.
Of the leasing companies, “Triton stands ahead of all of them; since 2008 they have been the strongest buyer.” Others entering the reefer box business include Transamerica, Textainer, SeaCube and Cronos, said Foxcroft.
The vast majority of the boxes are all-purpose reefers, with specialty containers such as controlled atmosphere equipment accounting for only a few percentage points, he said.
“It’s accurate to say the controlled atmosphere accounts for less than 5 percent of the fleet. Most operators just want an all-purpose box, not to invest in such a niche market.”
Prices for new reefer containers have varied widely in recent years, but not because of the mechanical equipment. “The steel cost of the body of the container varies, but the machinery cost has been static,” Foxcroft said. He said the lowest price for a 40-foot unit has been about $16,000, with prices hitting $19,000 at one point. Average costs have stayed in a range of $16,500 to $18,500, he said.
Several factors are leading to the projected record year. “A lot of carriers want to get back into the reefer market after not buying anything — the need for replacement units is higher because of lower purchases in 2009 and 2010.
Customer demand is also up as the reefer market worldwide continues to see about an 8 percent annual growth in volume, he said. Added to the overall reefer market growth is the continual market share swing from specialized breakbulk reefer vessels to containerized reefer service.
“One company that bought a lot of containers recently is Seatrade, one of the biggest breakbulk reefer operators,” Foxcroft said.
Seatrade uses containers on the decks of its breakbulk vessels, and the two new vessels in its fleet can hold about 500 boxes. On occasion, Seatrade also uses charter container vessels to move a large number of reefer boxes in busy trade lanes.
Foxcroft said it’s unclear now whether the emergence of leasing companies is a long-term trend. He said the leasing companies are interested now because during the recession, reefer traffic stayed steady while the dry sector plummeted. “I think the lack of volatility in the market makes it more attractive now.
“Reefers are very expensive equipment, and it is a high-value trade so carriers have been more interest in owning reefers than dry boxes. For a number of years, leasing companies stayed out of the market because it is risky.”
Because of the growing shortage of container bodies, Foxcroft said there would continue to be a slight shortfall in reefer capacity.
New construction techniques extend the life of refrigerated containers built today.
“In older boxes there is something called delamination, where the insulation starts to break down,” Foxcroft said. “The newer boxes have a spray foam insulation that lasts longer. In general, 12 years is a sensible life for reefers.”
Contact Stephanie Nall at email@example.com.