The latest whisper in the shipping and fresh produce logistics sector is all about a possible new supply chain bottleneck. It looks very much like the major container shipping lines are putting fresh investment in reefer boxes (refrigerated units) on hold until the recent and significant programme of rate increases has been more widely accepted throughout global markets. With this in mind, there is the growing possibility that shippers could find capacity increasingly scarce.
According to analyst reports, more conventional reefer vessels were scrapped last year than in any other year in history. Reefer vessels are ships with refrigerated holds as opposed to ones carrying standalone reefer containers.
Although they represent less than 10 per cent of the total reefer capacity, more than 70 such ships were ‘recycled’ in 2012, meaning the global fleet has now shrunk to its smallest level in living memory – with no new vessels under construction.
The same analysts have indicated that the demand for perishable transport is forecast to grow by 4.5 per cent this year. Combine this with the lack of investment in both conventional reefer vessels and the – larger and strategically more important – reefer container carriers and you are looking at the likelihood of a possible ‘perfect storm’ with the subsequent capacity bottlenecks.
Meanwhile, international shippers of fresh produce are caught in something of a cleft stick at the moment. Seasonal demands and fluctuations cause issues; for instance, right now is something of a peak period for apples. Importers of apples will be well aware that duty payable between April and August is zero-rated, but then shoots back up again, therefore creating its own mini boom import period.
These fluctuations create pressure points when demand outstrips supply and customers are finding they have little choice but to stump up and pay the increased rates demanded by the shipping lines.
There seems no early or easy end in sight, with everyone sticking to their guns in the rate war. A representative of the largest shipping company on the planet – which enjoys a reputed 25 per cent market share – reiterated recently that “our reefer rate restructuring initiative aims to provide us with the returns so we can reinvest in the future.”
It has even stated on the record it’s happy to sacrifice short-term market share in order to redress this seeming imbalance. You would assume that this might mean more competitive pricing. Unfortunately, most of the other box lines have fallen in behind the market leader and are looking for similar rate rises. Combine this with intransigence with the aforementioned peak season and lack of current investment and we may well be set for that ‘perfect storm.’ —
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