The international cold chain received a significant investment in 2011 when a record number of refrigerated containers joined the global fleet, according to industry analyst Andrew Foxcroft.
Even after factoring in the boxes used to replace old, ailing or obsolete containers, the global fleet grew 13 percent last year, to 2.05 million 20-foot-equivalent units, he reported in a container census study published by Drewry Maritime.
Reefer box purchases this year won’t reach record levels, but will be strong, he said. “At the end of the year, I think we’ll see that the fleet grew by another 10 percent,” Foxcroft said.
Global production of reefer containers is about the same as last year. The question is how much goes to expand the fleet and how much is for replacement.
Some carriers have held on to containers for longer periods and used purchases to expand their fleet since the global financial upheaval in 2009, he said. “It does seem to be the case that one lingering effect of the recession is that people are holding on longer to their equipment,” Foxcroft said. “At some point, they are going to have to do more replacements, as the fleet ages. For every carrier, that is at a different point.”
Jacksonville, Fla.-based Sea Star Line this year began a five-year, $11 million program to add new, technologically improved refrigerated equipment to its operations. When the program is completed in 2016, the average age of the Sea Star refrigerated fleet will be about 3 ½ years, the youngest fleet of any commercial trade, the carrier said. High-quality, reliable refrigerated equipment is critical to ensure that produce and other foodstuffs are delivered in the best possible conditions, Sea Star said.
The record fleet expansion doesn’t spell a glut of reefers for the market, Foxcroft said. “The fleet is growing, but demand is growing right along with it. Food trade is up, and the conversion from breakbulk to container continues,” he said.
Leasing companies also are becoming bigger market factors. “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 because of complexity and liability.”
In a typical year, the ratio of new boxes would be 70 percent sold to carriers and 30 percent to leasing companies. That flipped in 2009, with leasing companies accounting for about 60 percent of the new reefers.
“That percentage seems to be holding,” Foxcroft said. “Leasing companies seem to be buying a majority of the reefers. As long as the carriers have trouble raising capital, I think we’ll see the importance of leasing in procurement.”
Leasing companies seem to see the situation in the same light. “Given that now, the carriers prefer to lease more than they prefer to own, we see ample opportunity to expand into the reefer leasing business,” Seacube Container Leasing CEO Joseph Kwok told investors in an August conference call. Seacube plans to spend another $98 million on new equipment before the end of the year, and “most of that will be reefer,” Kwok said.
Textainer Group Holdings officials told investors last month that about 25 percent of the company’s $760 million spending this year has been in refrigerated containers.
Some carriers are bucking the leasing trend and continuing to purchase their own boxes. “We are investing in reefers to the point of replacement,” said Vince Rankin, APL’s senior director of reefer trade for the Americas. “Every year we continue to invest to that replacement level. Are we adding capacity? Not this year, but we are not allowing our fleet to get older.”
The carrier hasn’t made spending decisions for next year, Rankin said, but it’s doubtful there will be any major increase in reefer orders.
Horizon Lines added 400 containers to its fleet this year for the Jones Act carrier’s Hawaii trade lane. The new units feature several design enhancements developed by the company’s commercial and engineering teams, including enhanced insulation and stronger floors that improve operating efficiency and durability. Each container is equipped with a new style of door lock seal, and the cooling unit itself is bolted into place with a wire-seal to detect unauthorized access.
These advancements make the containers more secure to handle high-value perishables inventory.
Maersk Line, which handles more reefer cargo than any other container line, said it would not purchase any new refrigerated containers in 2013, even for replacement purposes. “Maersk has made the decision not to make an investment in refrigerated containers in 2013,” said William Duggan, vice president of refrigerated services North America.
Customer demand for refrigerated service remains high, he said, but market uncertainties in the container industry as a whole remain high, too.
Maersk purchased more than 100,000 new reefer units between 2008 and 2012 and controls about 25 percent of the global fleet, he said. Reefer containers cost about four times the amount of a dry container, and the carrier needs to contain costs in an uncertain economic environment, Duggan said.
Maersk Line CEO Soren Skou has underlined that point, telling trade reporters in Europe that shippers of refrigerated cargo should expect to see higher freight rates. “When we look at reefer rates and what we have invested in terms of equipment, plus the extra energy usage, we are simply not making a decent return, and we will be working on increasing rates for the reefer space in the coming six months,” he told Lloyd’s List in mid-August.
Maersk’s decision adds uncertainty to the reefer production picture next year because “Maersk has really dominated among carriers in buying boxes,” Foxcroft said. “I think the upshot is that they bought so much in the last couple of years they need to digest what they already have.”
Maersk acquired 60,000 TEUs of reefers, or about 20 percent of global output, and had a similar buying program this year, he said.
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