Container carriers began the year with seemingly unshakeable resolve to increase rates on refrigerated cargoes, saying the prices were far below what carriers need to earn a return on their sizable investments.
Now rates seem to be in a freefall. The overall dynamics of the container industry, especially vessel overcapacity, are a main component of what is driving rates, but soft demand, governmental bans and lower sales volumes for a number of commodities are adding to the downward pressure.
“There were some carriers that asked for (general rate increases) this spring, but I don’t think there were any that got any,” said Bob Weiss, independent administrator for the Food Shippers Association of North America. “We know steamship lines are losing money, so we aren’t trying to push rates down.” He said shippers aren’t having trouble booking equipment or space for export cargoes.
Most carriers won rate hikes in January on reefer shipments, although the increases ranged from $100 to $500 per container, not the $1,500 carriers sought. “Prior to the end of March, we were up on average about $200 per container over last year in the trans-Pacific,” said Vince Rankin, APL’s director of refrigerated trade for the Americas. He declined to discuss current rates in the trade, as did a number of other carrier representatives.
But there seems to be no denying that demand for reefer exports isn’t as strong last year. “The market in general is a little bit soft, mostly because of economic conditions around the world,” said Bill Duggan, Maersk Line’s vice president of refrigerated services in North America. “I had hoped to see better trading conditions for this year, but Europe’s economy is pulling things down. Europe is such a net importer that it is certainly having an impact.” Volumes are down “a little bit, but not a lot below last year, perhaps 10 to 15 percent lower. It’s just not as robust,” he said.
Rankin called the current market a mixed bag, depending on trade lane and commodity. “Latin America has been pretty good, but we’re at the end of the peak season so that is slowing down,” he said. “We’re at the beginning of a seasonal downturn, but we expect the summer fruit season to be strong.”
He pointed to Japan as a bright spot, after the government there relaxed restrictions on beef imports. U.S. producers now can sell beef from animals up to 30 months of age to Japanese consumers, as opposed to the previous 20-month cutoff. That change took effect in mid-February, and beef shipments to Japan in March soared 79.3 percent to 18,565 metric tons from a year earlier, according to the U.S. Meat Export Federation.
Despite the jump in shipments to Japan, total beef exports were down 6.9 percent in March from year-earlier levels. For the first three months of the year, total beef export shipments were down 4 percent to 256,587 metric tons.
A big part of that drop can be traced to a Russian ban imposed on U.S. beef and pork that took effect in January. Russia will only allow the import of meat certified to be free of ractopamine, a feed additive used to promote lean growth. The U.S. is trying to negotiate with Russia, saying the commodities meet global health standards for permissible levels of ractopomine. Beef sales to Russia plunged 87 percent to 1,858 metric tons in the first three months of the year.
“Chinese consumers are shunning poultry because of avian flu, so shipments of chicken are down a lot,” Duggan said. “People thought that would mean they would switch to other proteins, perhaps seafood, but it isn’t happening.”
Last year’s Washington state apple crop was a record 130 million 40-pound boxes, up from 108 million in 2011. A bumper crop usually translates into lower prices per pound, but severe weather in eastern and Midwest apple-growing areas cut yields in those regions. That kept prices stable for the Pacific Northwest fruit and gave growers an opportunity to sell increased domestic sales.
Exports through the end of March were 6 percent higher compared to the same period last year at 38.2 million boxes, according to the Washington State Apple Commission. Sales are up to Mexico and Canada, the top two U.S. export markets.
On the flip side, China halted imports of Washington apples in August, citing a post-harvest disease that could affect the Chinese crop. Trade officials are trying to negotiate an end to that ban. The Washington Apple Commission said China could become a 5 million-box market each year if the trade issue is resolved.
In April, China abruptly banned all citrus from California as well, citing the discovery of Phytophthora syringae, or brown rot, in an unknown number of shipments. Chinese regulators agreed to accept shipments that were in transit before the ban was announced.
Animal and Plant Health Inspection Service officials are working on a response to China that will include the shipments, description of the disease and treatment alternatives, with the goal of reopening the market to California citrus, spokeswoman Tanya Espinosa said.
Contact Stephanie Nall at firstname.lastname@example.org.