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Temperature-controlled freight rates increase amidst reefer container scarcity
A shortage of refrigerated containers has led to a 2 percent increase in temperature-controlled freight rates in the second quarter and prices are set to rise further once peak season begins in the final quarter of the year.
The US$51 increase in reefer freight rates to $3,042 in the second quarter contrasted with trajectory of rates for dry containers, which fell by $85, or 5 per cent, to $1,656, in the same period, according to analyst Drewry.
The analyst recently began compiling reefer freight rates and other information in a bid to provide greater visibility into the industry. Drewry's assessment adds to the growing sense that diminished refrigerated container production in recent years, coupled with a steady increase in demand for reefer containers, has sparked sporadic shortages that could worsen in the coming months.
However, there is no consensus that a shortage exists, and if it does, how far reaching it is, or which trade routes or geographic areas are most affected. Robert Sappio, CEO of SeaCube, the New Jersey-based container lessor, said that with demand for reefers growing at about 4 percent a year and reefer production seriously lagging in 2016 and 2017, the shortage is here.
In 2016, production maxed out at 114,000 TEU, compared to the historical average production of 200,000 reefers annually. A senior consultant at Drewry, Stijn Rubens, said the reefer shortage began last year, emerging in Europe in April and a few weeks later in Brazil. He said he expected it to continue through the year, especially in the peak reefer season in the final quarter of the year, and also next year.
"We are seeing these shortages in what is not the peak season," said Mr Rubens, adding that in the peak reefer season at the end of the year "it's very likely that we will see similar situation, we just don't know where it will occur." He added that the underlying supply and demand mix would suggest that the shortage would be even stronger," and rates could go up even more, in December.
Drewry noted that "a decade of cost cutting among shipping lines has led to genuine equipment shortages caused by under investment in new reefer equipment."
The carriers' decision "to stop repositioning empties to certain demand areas that are in deficit (due to low import volumes)" has also contributed to the problem, the analyst said.
Maersk Line said recently that it has not seen any "significant" reefer shortage. CMA CGM said as a result of growth in the reefer market the carrier "has seen strong demand for refrigerated services," and while it "has not experienced a systemic shortage of reefers," has invested in more reefer boxes nevertheless.
The possibility of a reefer shortage was highlighted recently at JOCs Container Trade Europe Conference in Hamburg, where Rank Ganse, global director of reefer logistics at Kuehne + Nagel in Germany, said that the company had seen a "massive reefer container shortage, particularly in the northern hemisphere."
Also at the conference, Rolf Habben Jansen, CEO of Hapag-Lloyd, said the company has seen a "potential shortage" that had prompted the company to look for "more innovative ways to boost availability of equipment." The company 12 days ago announced it had ordered 7,700 new refrigerated boxes, IHS Media reported.
Mr Sappio of SeaCube, said one reason for the reefer shortfall is that carriers, who have struggled financially in recent years, have not invested in refrigerated containers as much as they used to. Worldwide reefer stock is about 2.8 million TEU, or about 7 percent of the total container stock, he said.
Publication date: 10/5/2017
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