After the 10th Cool Logistics Global congress in Antwerp this October 2018, the Cool Logistics team asked conference chairman Ole Schack-Petersen of LCL and Broom Group for his reflections on the state of the union in reefer container shipping
Before joining Damco and later Maersk Line, Ole Shack Petersen was with Lauritzen Reefers and Lauritzen Cool Logistics (LCL), before returning to LCL as chief strategy officer and the Broom Group as Executive Director. He has thus witnessed and helped to shape some of the key trends in global perishable logistics over recent decades. A regular advisor and participant at Cool Logistics, Mr Petersen was one of the chairmen for the 2018 edition.
CL: Bigger container ships, steaming slower, are still being brought on board with the stated goal of generating much-needed economies of scale. But we have seen that freight rates have remained in the doldrums, including for reefer cargoes. What does this all mean for carriers and shippers of fresh and frozen produce?
OSP: The large ships are cannibalising their smaller sister vessels, whether on the head-haul or the back-haul. Small container vessels will not be able to compete, whether run by carriers or fruit majors, as the liner carriers will completely control the containerised volumes of what, in the reefer business, we traditionally consider back-haul and which the lines consider their head-haul. Exports of mainly dry cargoes from USA and Europe to Latin America in particular, but also West Africa, will be hugely affected, leaving the smaller vessels with few back-haul volumes and an ‘out-of-kilter’ utilisation factor between head-haul and back-haul, producing an even bigger CO2 footprint for each fruit carried.
CL: Can you explain why the fruit handling business defines logistics and transportation as ‘time to market’?
OSP: In the world of reefer shipping there are two parameters that really count: speed and dedication. Applied to the banana business this means a 28-day round-voyage Latam-Europe-Latam. A ten or eleven-day transit time to market will always be preferable to a 17+ day route, because the shorter the time stored under refrigeration and/or in reefer containers, the longer the shelf-life of the product.
CL: So if it’s about time, when do you think that ‘time will be up’ for perishables shipping as we experience it today?
OSP: I see two external challenges. First is the trend, particularly in USA and Europe, towards buying more locally-grown produce. Second is the need to reduce single trip transportation by sea and road. Empty ships don’t pay for CO2 emissions. Shipping must become CO2 neutral. We need to create balanced flows for this to happen. Sooner or later half-empty or even completely empty ships on the return leg will have to become a thing of the past.
CL: How can this be implemented for the fresh produce industry? Would you suggest that empty ships should be banned?
OSP: This could be done by a mixture of external pressure (legislation), whereby carriers and users jointly are required to minimise pollution impact, and by maximising volumes loaded in either direction and, specifically for the banana and fruit business, with the backing of new vessel concepts such as the Reefer RoRo (which was presented at Cool Logistics Global 2013). The Reefer RoRo ship combines adequate size, speed and fast port turn-around with the availability of plenty of back-haul cargoes and with no or little further port investment, running from day one on alternative fuels like methanol or LNG.
CL: How do you see the development of fresh and frozen produce in the next ten years?
OSP: As mentioned earlier, because consumers in USA and Europe will seek out more sustainably sourced and locally produced perishables, frozen products (meats in general) will eventually plateau and even decline in the long term. Also, societies both in the East and West will eventually revert to consume more local fresh produce during their seasons and eat more and more farmed seafood.
CL: This sounds as if you were spelling doom and gloom for reefer shipping as a whole?
OSP: The answer will lie in creating balanced trade flows and it doesn’t matter if head-haul and back-haul concepts are reversed. In the end, all products are ‘perishable’ i.e. dry, fresh and frozen.
CL: The carriers are looking beyond shipping to increase sales and take more control over extended supply chain flows. What are the chances of success for this greater end-to-end service offering?
OSP: In an attempt to “stop the race to the bottom”, largely created by over-tonnaging both in the number and size of vessels, the container carriers are seeking new avenues to increase sales by acting as bankers, customs brokers, truckers, warehouse operators, etc. etc.
Personally, I think carriers will quickly reach a peak as to how much customers will allow them to get involved. After all, nobody wants their business to be controlled by an external player that, with all due respect to the shipping lines, is very far away from the centre of the action. In reefer supply chain management, that centre is to produce and retail multiple varieties, with ever more narrow windows of allocation, from multiple origins to multiple destinations which, to complicate matters even further, keep changing from one year to another.
CL: How does container shipping become profitable?
OSP: Stop providing more capacity than needed. Become much more efficient when it comes to equipment time spent in terminals, with truckers, customers and empty depots. Telematics like Maersk has deployed are part of the answer, but for sure blockchain and AI technologies will also be part of making the lines’ internal logistics more efficient, with the result of less capital tied up. But for this to happen, carriers need to make their data transparent to all actors in the supply-chain, irrespective of the type of cargoes involved.
Ole Schack-Petersen is Senior VP and Chief Strategy Officer at LCL and the Broom Group of Companies. He previously worked as Director and Global Head of Reefer Marketing at Maersk Line and held senior positions at freight forwarder Damco. He started his career in shipping and logistics in 1978 at J. Lauritzen A/S.