Thursday, 27 September 2012

The new cold war: Traditional vs. containers

The writing on the wall has been legible for some time, but it appears that the pace at which shippers are moving away from reefer ships is increasing. ‘Container Consensus’- a report put out by reputed firm Drewry- says that the growth in reefer containers nearly doubled last year.

"The maritime refrigerated container fleet grew by a record 13% during 2011 and ended the year at 2,048,000 TEU. This was almost double the 6.6% increase achieved in 2010 and, in fact, one of the highest rates of annual growth ever reported for the sector," it says. There were just 1,377,000 reefer containers in 2006. In 2011, the numbers of refrigerated boxes had shot up to 2,048,000.

All is not lost for reefer ships yet, especially on seasonal trades. Says Ole Petersen, who head of Perishable at freight forwarders Damco, "It all depends on the type of trade you are talking about and whether or not the ship is filled," he explains. "The economy of scale - particularly in relation to seasonal trade - often benefits the reefer vessels, as they can more easily swing in and out of seasons."

The trend- especially in the fruit trade- seems to be definitely in favour of containers, though- and is hardly new, as Sharon Cilliers of ‘Goreefers’ points out. "This has been happening for the past eight years or so, it's just accelerated as the price of oil has risen. With container shipping the unit cost is so much cheaper than on a conventional reefer vessel. There is no way to combat this and we've seen a number of reefer shippers shut down," she said. 

The fact that containers are low investment and container ships have much more flexibility in loading a mix of non-perishables and perishables tilts the balance in their favour. 

Ole says that reefer ships are running in parallel with container ships in some trades in South America and South Africa during the peak season, also because some countries like Argentina have infrastructure already in place that is geared for reefer ships. Despite the pressure, he feels that there will still be place for traditional vessels. "I am definitely not a believer in things switching over 100%," he says. "The big challenge in this is that it is easier for investors to invest in containers than in standard reefer vessels”. 

Vice President of NYK Cool John Rowland indicates that the war is not yet over. Container companies had gone on the offensive to lure shippers away from traditional reefer vessels, he says, but recent developments indicate that unsustainable box rates, delays caused by slow steaming and extra port calls made by container ships may send customers back to traditional reefers. " 

“Very attractive rates were offered to lure cargo away from the traditional specialised reefer services and this proved quite successful in the beginning,” he says. "However, more recently it can be seen that the rates offered by the lines are unsustainable and some major container carriers are making serious attempts to restore their reefer rates. If the rumoured rates increases are implemented it is very likely that there will no longer be cost advantages to container shipping."

"Money is important," he says, "but for reefer commodities, so is a fast and reliable service." "With perhaps a more level playing field, we may see the operators of specialised reefers clawing back some of the cargoes and trade lost to the container lines."



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