Ahead of the 11th Cool Logistics Global Conference & Exhibition in Valencia this September, Alex von Stempel ponders the future for conventional reefer ships and the impact on reefer container supply, demand and rates
The recent decision by Chiquita to go fully containerised could prove to be, for conventional shipping at least, the final straw. A second question will be: could this exacerbate the current shortage of reefer containers?
After more than a century of operating conventional reefer ships, Chiquita’s shipping subsidiary Great White Fleet will now instead run five fully containerised vessels to transport bananas from the Port of Moin in Costa Rica to the Dutch Port of Vlissingen, which will act as a hub for northern Europe. The first ship on the new service arrived in Vlissingen mid-February. Chiquita’s decision to containerise its banana shipments will, no doubt, have been aided by APM Terminals’ recently opened container terminal in Moin, targeted at the Latin fruit export trade with a massive 6,000 reefer power plugs.
Dole is now one of the few remaining produce carriers still using conventional ships on some of its trade routes. Although there are still a few mega-sized conventional vessels being built in the Far East, could conventional banana ships over 750,000 cubic feet vessels now find themselves relegated to serving virtually only the Atlantic trade from Latin America to Russia? (On a side note, there is some evidence that the continuing Russian food embargo has benefited the banana trade as a part replacement for ongoing Russian fresh fruit demand from embargoed regions).
The Russians have already sent many ancient freezer ships to the scrapyard in recent years and we could witness another large chunk of this old fleet disappearing for good over the coming months. Speaking at Cool Logistics Global in Antwerp last year, Maersk Line and others predicted that the upcoming IMO 2020 sulphur cap will hasten the demise of older conventional ships as they will simply not be economic to fit with scrubbers or run on more expensive low sulphur fuel oil (LFSO). Surveys on conventional ships tend to be carried out during the summer months, the traditional off-season for those vessels, so this could be a crunch time.
The domino effect
So, what happens once the disappearance of the old freezer ships knocks out another plank from under the remaining bulk of the seafood trade that still relies on conventional ships? The margins for freight forwarders handling frozen may be considerably thinner than for those handling fresh produce, but the lure of massive volumes that could now fall into their laps could prove to be irresistible. As a result, we could witness a potentially dramatic effect on reefer box operations.
As forecast at Cool Logistics Global 2017 in Algeciras there were signs of a reefer box shortage becoming worse in 2018. This proved to be largely correct, as reefer lessors didn’t fill the gap in the market. Apparently, this was due to per diems not proving to be attractive enough.
Not surprisingly as a result, shippers in both Latin America and South Africa have started to complain more about a lack of reefer boxes in the fruit season. This may have been exacerbated partly by climate change-induced seasonal shifts, but also in no small measure to increased inland positioning costs of reefer boxes. Complaints about substandard and dirty reefer boxes being delivered to shippers for loading in South Africa have been reported in the last year.
With fewer reefer boxes being ordered in 2018 than in years before, the economics of reefer logistics have taken another significant turn towards the supply side. Faced with the choice between old boxes or no boxes, the answer is clear, especially when there is more lucrative reefer cargo to be had in the market, such as pharmaceuticals.
One thing seems obvious: shippers will have to pay more for shipping in the future!
Alex von Stempel is Director of Cool Logistics Resources Ltd, dedicated provider of global business networking and education for logistics and transport executives specialising in perishable and temperature-controlled cargoes. The 11th annual Cool Logistics Global conference and exhibition takes place 17–19 September 2019 in Valencia, Spain and is open for early bird bookings until 25 June