Another Winter of Reefer Discontent

Shipping Industry consultants, Drewry recently hosted a webinar on the question of the reefer cargo shipping market and, specifically the temperature- controlled cargo equipment situation. For all shippers of cargo using deep-sea services and requiring such containers, the 2019-2020 winter season was very difficult with serious equipment shortages and delays in shipping cargo.

In the past year global reefer traffic grew to over 130 million tonnes and current estimates for growth in the period up to 2024 are for this volume to grow at an annual rate of 3.7% to 156million tonnes. This compares to a growth in dry cargo volume of 2.2% a year. In 2019 shipments of Pork grew by 17% in response to the African swine flu epidemic in China, an epidemic that is still in place. Protein exports to Asia grew by 25% while the Banana and many fruit businesses remained very strong.

If any transport business is to be viable the shipment of goods and equipment must be equalized in both directions. In the container business the additional complication is that the vessels carry a mix of cargoes and container equipment and different equipment may serve freight flows in different directions. In the reefer container business, the equipment imbalances are severe with some 80% of containers essentially in the wrong place. Thus, in Asia in 2019 there were over one million 40ft reefer containers that had to be shipped back to countries supplying these markets empty. At the same time, for dry cargo empty containers were in extremely short supply in Asia with many clogging up terminals at destination markets for Asian manufactured goods.

On the Europe / Asia shipping lanes, particularly since the end of the Chinese COVID-19 shutdown, exports from there to Europe and, indeed to the US, have been very strong winning the Shipping Lines high rates and encouraging them to ship as many dry boxes as possible. This has meant that the available space on board ship to take empty reefer boxes has become very limited. Exporters in Europe and elsewhere have had to fight very hard to secure capacity and paid significant premiums. Add to this the fact that the departments within the major shipping lines that are responsible for their reefer container business are unable to secure the speed of equipment turnaround that will make their business profitable.

Is there any relief in sight? The shipping lines and the container leasing companies are ordering some 5% more new containers from the Chinese manufacturers each year. A number of these are replacing older units which may fall below current technical standards but many of the new ones are “smart” containers with built-in IT capability that enables their continuous monitoring. The focus here is both on location and status of the cargo as well as signaling the need for preventative maintenance in real time, thus ensuring that the container remains in use.

From the perspective of Irish exporters of product requiring shipment in temperature-controlled containers, the essential thing is to make firm commitments with the carrier well in advance of the required shipment date and to keep a dialogue with them on any changes in requirements. It remains likely that, over the winter months Shipping Lines will continue to “blank” sailings leading to further delays in delivery of cargo.

There is every reason to believe that the equipment situation will remain very tight and may become a factor in exporters and, indeed, importers seeking to near-source their markets and product sources.