“It may be a bit boring,” says Philip Gray, reefer analyst with Drewry Shipping Consultants, focussed on shipping analysis, about the reefer market. With boring he means that there likely will be more stability and a more balanced reefer market with more equipment available and adjustment of rates.
During his presentation at Fruit Logistica he adds that after a few eventful logistical years, boring is not a bad thing. “Shippers need stability as produce is expensive these days to produce.” The reefer analyst foresees that rising prices could lead to changes in the fresh produce trade as well. “In the days of an abundance of container space and cheap stuff, a lot of produce would be sent overseas on speculation, which was really not required by the market. That also kept the produce prices pretty low. It was just too cheap. Maybe now it will be a bit more in balance.”
And that stability also extends to the growth perspective of the reefer market. “Growth in seaborne volumes was one percent over 2022.” Philip calls it quiet and does not expect a huge growth during 2023 either. “We will see some growth in 2023. Towards 2024 and onwards we expect an improvement. Containerised reefer traffic is expected to remain broadly flat in 2023 before growing 4.6 percent in 2024.”
Philip Gray of Drewry explains that the high prices of dry cargo compete with AGF 2.
Drop in fruit exports
“The reefer market proved resilient in 2022, with estimated seaborne trade of perishable reefer commodities reaching 138,6 million tonnes. Meat remains the largest seaborne commodity, accounting for 22 percent of the trade, followed by bananas at 15 percent and fish at 14 percent.” Those figures prompt Philip to mention that the number one reefer cargo, protein, is also where to look in terms of competition for space and pricing, where seasonality also plays a role. Although still the most traded fresh produce commodity, the reefer transported volume of bananas fell during 2022 and Philip expects a continuation of that situation. “High input costs and low exports of Ecuadorian bananas impacted seaborne demand.”
Also Andrew Lorimer, CEO of Datamar, focussing on shipping and trade intelligence, sees a drop in fruit exports. In his Fruit Logistica presentation he focusses on South American countries and notes that conflict in Ukraine led to inflation with the influence of that on the disposable income of Europeans causing a big drop in demand for fruit. “Fruit takes less of a priority, becoming maybe a bit of a luxury good.”
Andrew mentions that where the number one South American (Argentina, Brazil, Chile, Paraguay and Uruguay) export reefer cargo – meat; mounting to 9,8 million tonnes in 2022 - used to compete with fruit – a market of almost 4 million tonnes - for container space and rates, this appears to be no longer the case. The CEO sees a combination of less demand because of the dropping fruit exports in combination with the wider availability of containers.
Asia is the engine of the trade
Datamar mentions that fruit exports from Brazil, after years or growth, fell by a whopping 24.4 percent in 2022 compared to 2021. In 2022 Brazilian fruit exports amounted to 9,8 percent of all reefer transports. Chile shows a similar picture with a decrease in fruit exports to most destinations in 2022: USA – 8 percent, the Netherlands -3 percent and UK down by 13 percent. Interestingly the fruit exports to China went up by 20 percent, just like those to Colombia, that grew by 17 percent.
“That shows you the difference of a market that is under pressure compared to a market where there isn’t that kind of economic pressure.” The increasing exports towards China tie in with Philip’s remark that Asia is the engine of the trade. “Asia is driving a lot of the business and becomes the most important destination for global reefer trade. World-wide seaborne volumes continue to move in Asian direction with 37 percent of all trade in 2022 and expectations of 39 percent of all trade by 2026.”
Philip notes that reefer container rates have passed their peak in Q3 of 2022. He sees the reefer rates coming down, but as they did not rise as much as the dry cargo rates, he expects them not to decrease as hard either. Besides this downward trend, the reefer analyst expects seasonality as well as different trade lanes to play a role in the rate fluctuations. He also observes that, where during the pandemic perishables had to compete with dry cargo for container space, this is no longer the case, since that part of the supply has eased. This development also leads to the possibility of moving containers out of China again.
Specialised reefer vessels
The Drewry reefer analyst sees that although containers take the lion’s share of the cargo, there is some development on reefer specialised vessels. “Lately, with all that we have seen going on in the world, the traditional reefer ships have been enjoying a great time. They have been making a lot of money. A lot of shippers are putting a bit of cargo in both camps. There are around 490 ships all around and there is much demand worldwide, pushing up those rates. The specialised reefer vessels are enjoying and will continue to enjoy a very good market in the next year or two. The container volume will grow faster than the overall volume, but there is still a certain amount of interest from the market to carry cargo in specialised reefer vessels.”
An observation that is shared by Andrew Lorimer. He notes that last year five percent of the cargo switched to reefer vessels in Brazil and in Chile some 10 percent is taken in break bulk. “Last year a big exporter of melons switched over from reefer containers to reefer vessels. That hadn’t happened in Brazil for a very long time.”
It makes the Datamar CEO wonder if these developments could lead to growth for specialised reefer vessels? Although there are some new builds, he concludes that given the size and the age of the fleet, it is not a long term solution right now. He observes that the changeover last year in Brazil and Chile was mainly driven by the bad operations surrounding containerised transports of which he expects a much smoother situation going forward. Andrew thinks the reefer container price is also an element driving demand for specialised reefers and that those may provide an alternative for both elements. It leads him to conclude that if more cargo is switched to reefer vessels, new investments might be on the horizon.
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