Much attention has been paid to the reefer shipping industry of late. Fleet reduction, the scrapping of vessels and near-empty order books have served to illustrate the sector’s decline as the trend towards containerisation continues.
And although conventional reefer tonnage versus containers was the main industry issue throughout the 1990s, according to London-based Drewry Shipping Consultants, it remains a central point today.
“The encroachment of container lines is the main pressure on the reefer industry,” says editor of Reefer Trends, Richard Bright. “Reefer containers have continued to take away market share in established trade routes such as South Africa and New Zealand. The problem is that during the southern hemisphere deciduous season rates per pallet for specialist reefers tend to be very high so containers, that have a flatter cost structure, have a significant advantage.”
Maersk positioned a lot of reefer vessels in Argentina this year, says Bright. “The company was looking at taking up to 30 per cent of the deciduous fruit trade, but since the problems with avian flu and difficulties with beef in the US, a lot of reefer boxes are tied up in ports so the company has lost capacity and positioning.”
Another problem is that the number of reefer boxes built is not significantly increasing. “Approximately 120,000 TEUs (twenty foot equivalent units) are built every year,” says Bright, “and each has an eight-12 year lifespan. The rate of replacement is not fast enough for box capacity to increase significantly and pose a major threat to the specialist reefer industry.”
Although the battle between reefers and containerisation remains important, more fundamental influences are now also coming to bear as export boards disappear and the balance of power shifts to the major retail chains according to Drewry Shipping Consultant’s report: Reefer shipping and logistics - re-engineering the cold chain.
Drewry’s John Fossey explains: “The retail chains view shipping as a component within a sophisticated logistics and supply chain management system. Those transporting or handling reefer cargoes (in ships and within terminals) will face new demands and methods of distribution. Adversarial owner versus charterer ‘battles’ will need to give way to co-operation and developing added value. The word transparency will loom larger.”
This does not just apply to those operating reefer vessels. The entire sector is having to face up to a new challenge: the changing nature of cold chain logistics as the demise of producer boards continues and the prominence of retail chains continues to grow, bringing about business attitudes and policies familiar to many in the retail and logistics sector, but relatively unknown in reefer shipping.
One way that the specialist reefer industry can remain competitive is to offer similar customer service to that offered by containers service, says Bright. “Many specialist reefer services are understaffed in comparison to their box-ship competitors. The reefer industry also needs to invest in tonnage. In the past, companies have not been able to do this because the market return has not been enough to justify a new build. However, last year was a good year for the industry and this year is also now looking as if it will be good if not better.”
Reefers are also running on a relatively ageing fleet, Bright continues. “The average age of a vessel is about 18 years old and normally once a ship is 26 years old, it is demolished. In less than 10 years you would expect a lot of ships to be scrapped but as the vessels have been well-maintained, they should last much longer,” he says.
GoReefers has developed its operations in the Netherlands, South Africa, New Zealand and China, specialising in transporting perishables. The company offers a varied range of services throughout the supply chain, finding independent solutions for each customer. Sea freight is just a part of the company’s offer. GoReefers also offers local logistics solutions and a service where companies pay only for the service they have used - a practice which transforms fixed costs into variable ones, making it easier to calculate total logistical expenditure. “It is vital to have both reefer and container shipping in terms of volume and availability of equipment,” says commercial manager, Joost Heere. “For instance, the southern hemisphere citrus season starts in the next six weeks so a huge amount is going to be shipped conventionally. I have always been confident that fruit such as oranges will always be a part of the reefer trade.”
A key business area for HPL, which operates from all major UK ports, is South Africa. “There is a good amount of product coming through from South Africa and Chile at present, as well as from the US and other parts of South America,” says operations director Martin Arrowsmith. “I would say there has been a gradual pick up in business in the last few years, and that companies are becoming a lot more optimistic. There used to be a lull in business in August and September, but we are busy all year round now. More people are talking about the industry with a renewed sense of optimism.”
Advanced technology has gone a long way to ensuring the sector remains competitive. OOCL has invested in controlled atmosphere (CA) reefer containers, which are able to maintain an ideal atmosphere for sensitive produce. Its CA reefer containers maintain a constant, ideal atmosphere by replacing consumed oxygen through a unique air-exchange system, in equilibrium with the produce’s deterioration rate.
To ensure that LauritzenCool Logistics (LCL) lives up to its promise to exporters that the movement and loading of their fruit exports is closely monitored, and to cater for the increased volumes being handled by LCL, a new operational office has been established at Cape Town harbour.
In addition to catering for the needs of the LCL operation’s staff for monitoring product and container movement, this office will also be involved in the release and clearing of inbound cargo. The office is situated in the Foregate complex at the bottom of the Heerengracht, in close proximity to forwarders, cold storage facilities, container stacks and the Duncan Dock.
Ultimately, says Fossey, “the 2003 season has provided a boost for the conventional reefer ship sector, for which moves to consolidate the industry can claim some benefit. However, it cannot be complacent. There are key aspects of conventional, palletised cargo working - particularly in the major fruit trades - that should fit better with the emerging supply chain requirements than containerised options. The challenge to the reefer sector is to convince the client of this.”
There are many good reasons why the reefer market will remain. “Much of the infrastructure in many countries, especially some banana producing regions, the mainstay for the reefer business, would not support the volume of containers required, and logistics would be difficult if not impossible,” says Bright. “In addition to this, container ships run to a strict liner schedule while reefer ships tend to be a lot more flexible.
“There is also potential for tremendous long-term growth for the reefer industry in China, the Middle East, North Africa including Egypt and potential via the Black Sea and also potential in the increase of fruit production.
“In terms of global banana trade, there was a five per cent increase in global banana trade last year to an estimated 634 million boxes and there is no reason why a similar increase should not happen this year. There has also been an increase in the production of exotics, notably pineapples and melons.
“The global reefer trade is forecast to grow between three and eight per cent between now and 2010 and reefer container capacity should increase by the same amount,” Bright continues. “There is definitely a place for reefer shipping in the future but how it will look depends on the next generation of reefer ships.”
Economics will dictate. Global trade is opening up and more fruit needs to be shipped. While containers are more concerned with small volumes, reefers are well placed for larger volume business. The next generation of reefer ships is likely to carry more deck-stow containers so they will be more flexible and better suited to market needs.
CARGOSMART-ENS UP PAYMENT
CargoSmart, a leading portal provider for the ocean container transportation industry with more than 11,000 registered users, has announced the launch of invoice and payment features, completing its development of the basic set of tools for online shipment cycle transactions. CargoSmart’s invoice and payment features help customers improve internal record keeping, minimise manual work, and reduce errors while calculating payments. Customers search, view, sort, tabulate, and print invoices as well as submit payment instructions to their carriers. Clients can also execute their most frequent shipment transactions entirely online, from booking to printing bills of lading to managing the payment of their invoices.
CargoSmart’s comprehensive online solutions let shippers and transportation intermediaries plan, process, monitor, and share shipment information. Users plan their shipment cycle by selecting a route from CargoSmart’s operational sailing schedules that carriers update several times a week. After selecting a route, they begin processing their shipments. Customers make bookings that immediately provide confirmed booking numbers, submit shipping instructions, prepare and print bills of lading, and manage invoices and payments.
Once the shipment is in transit, clients can closely monitor their shipment status from the point of origin to the final destination by either actively pulling information from the site or by having CargoSmart push information directly to them by e-mail. Users can query shipment status by vessel, container, bill of lading, and reference numbers. They can also subscribe to up to 17 different types of milestone notifications, seven different types of shipment exception alerts, and customised shipment reports with more than 70 possible information fields. Customers filter shipment information and share it securely both internally and with other companies to ensure that all parties in their supply chain have access to relevant, up-to-date information.
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