NOVA MEDIA PUBLISHING INC.

Challenging Times for Refrigerated Cargo Exporters

10.10.2019

A warning of a possible shortage of refrigerated containers was issue due to the imminent change in ship fuel that would lead to demolishing many old full reefer vessels, catalyzing the containerization process of many refrigerated cargo worldwide.

It remains to see, however, the real size of ASF - African Swine Fever and its effects on demand for reefer containers which is growing by 7% in the accumulated 2019, more than double the growth rate of undermined international trade. According to Seabury Consulting, in Europe and Latin America alone, frozen meat shipments to China grew 26% and 27% respectively this year. The ship Maersk Madrid even recorded in September of that year the historical mark of 984 x 40'Rh with Danish pig from Aarhus to Central China.

The situation becomes even more dramatic as orders for new equipment have been falling since 2017, allegedly due to the drop in freight rates and poor financial results reported by shipowners over the past decade.

Experts estimate that orders are currently around 60,000 reefer containers while 140,000 would be needed.

Speaking at Cool Logistics in Valencia, Spain, on September 18, Frank Ganse, Kuehne & Nagel VP Global & Head Reefer, which handles about 350,000 tonnes of refrigerated cargo per year, said the industry is on the brink of a major dilemma: "As shippers begin to reposition containers before the southern hemisphere fruit season, this unexpected demand from China will be the tipping point."

In other words, “the blanket will be short,” there will be not be enough containers for everyone, and against this backdrop, shipowners will certainly favor the most profitable routes. Fruit exporters from northeastern Brazil who have just started shipments of the 2019 harvest are already seeing substantial increases in freight in their pockets compared to previous years.

Faced with such a challenging scenario that tends to linger until China manages to stop the ASF outbreak and replenish its swine herd (at least 3 years) or shipowners start placing robust orders for new equipment (at least 1 year) until all deficit is resolved) there are even those who start to believe in a certain survival of the dedicated conventional reefer ships.

Either way, the fact is that freight like Santos / Asia at $ 1,500 or Santos / Europe at $ 2,000 is certainly "a thing of the past" and therefore it is up to refrigerated cargo exporters to closely monitor this situation to seek good negotiations and guarantees of shipment their product, however, without leaving "money on the table".

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