In mid-February, we published an article about over the Covid-19/Coronavirus' effect on the reefer market in Europe. At that time, eight percent of all available reefers worldwide were stuck in China. Now, an update - how do things look in the market now?
The latest reports from East Asia show that some companies are slowly getting back to work. This is, however, not nearly everywhere. Consumption is, therefore, gradually picking up again. That is according to Juri Falandt of the Dutch company, Milestone. "It is expected to take at least two to three more weeks before production is at full strength again. However, for now, there is still a huge shortage of truckers."
"These are needed to transport goods to and from the inland and harbor. Shipping companies have already canceled many trips employing void sailings. At the moment, it is still reasonably easy to book containers. But, this will become more difficult in the coming weeks. Then, production will reach normal levels. Everyone is going to try and catch up. There will be renewed pressure on rates and space in the coming weeks."
The congestion is, therefore, far from over. Seatrade's Yntze Buitenwerf agrees. In the previous article, he estimated that about 120,000 reefers were stranded in Chinese ports. That figure has now been adjusted to 200,000 - about 13% of the total number of worldwide reefer containers. "All these containers are still in the harbor terminals in China and surrounding countries."
"There, container ships have had no choice but to dump their loads. Some ships are still fully loaded because there is nowhere to temporarily offload. People must then also take into account the reefers that are in the incorrect ports. These still have to return. The harbors also have to still carry out their local activities too."
Shortages on the reefer market are also due to a lack of capacity to transport these containers. More products are also being carried in these containers. There is less new and lease equipment available. That is according to a shipowner. All of these factors spill into the rates people have to currently deal with on the market.
Hardly a reefer to be found
"Last week was the first time we could clearly see the shortages on the market. Container ships from Asia had hardly any empty equipment on board. That, while reefers were still heading that way. I, for example, know of clients who, at the moment, are getting only 25% of the number of reefers needed for their goods," says Ynte.
"Not all these issues will be resolved once the Chinese market improves. It will take months. All the reefers will need to be spread across the European and North American markets. The first tangible structural change is still, at least, eight weeks away. Also, the large container shipping companies have very little serious cashflow problems. In an attractive market, they might start charging higher tariffs for their reefers. So, not only will these shortages have long-term repercussions on the market, we can certainly expect these higher prices to continue."
Squid
Yntze sees another development on the market that people should take into account, besides the coronavirus. Fisheries around the Falkland Islands are catching massive amounts of squid at the moment. "You could compare this to a record harvest in the fruit and vegetable sector. That catch, however, requires our vessels. The fish needs to be brought to their destination. There are no reefer containers in the large nearby port of Montevideo in Uruguay. As a result, some of our ships will be out of commission for six months."
Awareness
Despite the current hardships, Buitenwerf has noticed that this situation has caused a shift in the sector's awareness of reefer ships' benefits. "This is an advantage we can find in this crisis, in spite of all the challenges. The trade sector has realized that the container market is accompanied by certain risks. For example, those of us with reefer ships can respond better to the market's needs."
"Think of the Moroccan citrus or Chilean cherry seasons. A container shipping company has to tow all its equipment to those countries. It is important to understand that container lines transport containers. We ultimately ship the load, not the container. A container ship with no equipment is useless," Ynte concludes.
For more information:
Yntze Buitenwerf
Seatrade Reefer Chartering
Tel: + (32) 3 544 9493
Email: Yntze.buitenwerf@seatrade.global
Website: www.Seatrade.com
For more information:
Milestone Fresh
Tel: +31 (0) 886 220 470
Email: fresh@milestonefresh.nl
Website: www.milestonefresh.nl