Seaborne refrigerated trade grows as perishable shippers raise demand for temperature-controlled containers.
Global trade in refrigerated goods moving in ships is expected to reach 134 million tons by 2021, up from 117 million tons in 2016, according to the consultants Drewry Shipping.
“Seaborne perishable reefer cargo has proved remarkably resilient to global issues, be they economic or climatic,” said Kevin Harding, a senior reefer market analyst last November, summarizing the London-based firm’s most recent annual review and forecast for refrigerated shipping.
Individual trades experienced fluctuations between 2006 and 2016, but grew at an overall compound annual growth rate (CAGR) of 3.3 percent. Drewry predicts that pace will slow to a 2.8 CAGR through 2021.
The biggest single refrigerated commodity moving by ship is meat, which increased between 2006 and 2016 at an annual rate of about 4 percent per year to about 26.4 million tons in 2016.
And while they account for only a tiny sliver of overall reefer trade, transport of exotic fruits has grown at any even faster rate. A recent press release from Maersk detailed how the ocean carrier has been able to help shippers of durian, a tropical fruit that is beloved by some but which many find smelly.
Growth in the perishable trade has been attributed to population growth, rising incomes in many parts of the developing world and an increased desire among consumers for more protein in their diets.
Uncertainty about trade with China has clouded the short-term outlook for some U.S. exports, including meat. On April 4, the Chinese government announced a proposal to levy retaliatory tariffs of 25 percent on imports of agricultural and food products from the United States, including beef.
There seemed to be good news last weekend with China and the U.S. issuing a joint statement saying they had “agreed on meaningful increases in United States agriculture and energy exports,” which led Morgan Stanley to predict a potential increase of $60 billion to $90 billion in Chinese purchases of U.S. goods, “with a rise in agriculture imports (particularly beef) in the near term” in an investment note cited by CNBC.
The U.S. Meat Export Federation (USMEF) noted China is a promising market for U.S. beef, and was only reopened in June 2017 after being closed for 13 years because of concern about bovine spongiform encephalopathy — mad cow disease.
Dan Halstrom, USMEF’s CEO, said since last summer interest in U.S. beef has steadily gained momentum, “but if an additional import tariff is imposed on U.S. beef, these constructive business relationships, and opportunities for further growth, will be put at risk.”
Reefer Containers. A continuing trend in refrigerated cargo is the steady migration by shippers from using specialized breakbulk ships in which cargo is carried in refrigerated holds below deck to individual reefer containers stacked on deck.
Carrier Transicold, which makes refrigeration units for container manufacturers, noted that refrigerated containers were first introduced 50 years ago.
“Often called a ‘picture frame’ unit, the self-contained refrigeration system fits within a narrow steel frame, approximately 8 by 8.5 feet, that is cleanly bolted to the front wall of an insulated shipping container,” said Carrier. Introduced in 1968, “it quickly defined the shape of marine refrigeration systems for generations to follow.”
The size of the specialized reefer ship fleet peaked in 1999, when there were 900 ships with reefer capacity of at least 100,000 cubic feet, Drewry said. Since then, the aggregate capacity of the specialized reefer fleet has fallen about 40 percent, from 299 million cubic feet to 183 million cubic feet on 546 ships.
The trend is expected to continue. Drewry said specialized reefer ships were estimated to carry about 20.7 percent of seaborne refrigerated cargo in 2016, and that share is forecast to drop to 14.7 percent in 2012 as more refrigerated cargo moves in containers. (However, Drewry noted that because they are used so intensively, conventional reefer ships are actually bigger players than they might appear to be at first blush. They manage to carry that fifth of the seaborne reefer cargo, although volume-wise they only account for about 5 percent to 6 percent of overall reefer space and that’s including the reefer containers they carry on deck.)
The biggest reefer cargo trade lane is the westbound transpacific. About 500,000 TEUs of reefer cargo moved from the United States to Asia in 2016, containers filled with cargo such as meat, poultry, fruit and vegetables, Drewry said.
When most people think of U.S. agriculture exports, they’re likely to envision thousands of railcars and barges shuttling products such as wheat, rice, feed grains and soybeans to ports or even containers filled with cotton and tobacco.
But the U.S. Department of Agriculture said when it comes to measuring the value of the country’s agriculture exports, most are high-value goods, like meats, fruits, vegetables and processed foods that are differentiated by factors such as brand, quality or sanitary and phytosanitary standards. Many of these products move in refrigerated containers.
In 2017, high-value agricultural exports from the United States amounted to nearly $92 billion, compared to $46.5 billion in bulk products that are sold in large quantities at relatively low per-unit costs and tend to be relatively standardized.
The second-largest reefer trade is Europe to Asia, which amounted to about 425,000 TEUs in 2016 and includes large amounts of seafood and pork.
As large as those volumes are, they are dwarfed by the dry containers moving on those two same routes. Reefer cargo represents a modest 8 percent share of exports from the United States and Europe to Asia.
The reefer trade is much more important on export routes from Brazil and the River Plate between Argentina and Uruguay. There, reefer cargo accounted for about a third of the containerized exports to both Europe and Asia and a whopping 65 percent to the Middle East.
Cold Is Hot. “Reefer trades have something of a reputation for volatility both in terms of volume and freight rates,” Drewry said earlier this year, but added that 2017 refrigerated rates held up better than those for dry boxes, rising consistently from $2,990 per container in the first quarter of the year to more than $3,080 per container in the fourth quarter.
“The recent wave of carrier consolidation, which will continue well into 2018, is having a direct impact on global market structure,” said Stijn Rubens, a senior consultant at Drewry Supply Chain Advisors. “As shipping lines gradually regain control of prevailing freight rates, the markets are becoming increasingly tight with behaviors one would more commonly associate with oligopoly conditions. The recent drop in investment in reefer containers only lends further weight to our expectations of further rate increases during 2018.”
The largest manufacturer of containers in the world, China International Marine Containers (CIMC), said last year it sold 109,100 TEUs of refrigerated containers, nearly 37 percent more than in 2016. Those strong sales continued this year: CIMC sold 41,400 TEUs of reefers in the first quarter of this year, 187.5 percent more than in the first quarter of 2017. In contrast, the company said it sold 1.3 million dry containers in 2017 and 351,900 during the first quarter, a 123 percent and 21 percent increase over the comparable periods a year earlier.
Hong Kong-based Singamas Container Holdings said it completed construction of a new refrigerated container factory in Qingdao, China, that began operation in the first quarter of 2018.
“We believe that specialized containers, particularly refrigerated containers, will be our growth driver, buoyed by the Qingdao production lines,” the company said in its annual report.
Maersk Container Industry (MCI) also said there was growing demand for refrigerated containers, noting that it sold 45,625 in 2017, 43 percent more than in 2016.
MCI makes reefer containers in factories in both China and Chile as well as dry or non-refrigerated containers in China.
“The reefer factories ran at full capacity
in Q1 2018 with the production volume
in the Chinese factory being on par with
2017, whereas the factory in Chile increased
the output by 17 percent,” the company reported in its first-quarter earnings report.
MCI said in the first quarter of 2018 it had overall revenue of $288 million, 18 percent more than in the first quarter of 2017. Earnings before interest tax, depreciation and amortization also was up 18 percent to $32 million. While revenue on dry containers was on par with 2017, MCI said its refrigerated container business benefited from both higher volumes and prices.
While sales to its sister company Maersk Line accounts for approximately 70 percent of MCI’s revenue, the company said that share is expected to drop because of increased sales to third-party customers.
MCI said it introduced an energy-metering feature on all new Star Cool machines in 2017 to “expand carriers’ operational transparency into actual energy consumption throughout the transport window over land and sea,” and Maersk Line launched remote container management for customers that makes “each refrigerated container’s location visible throughout its journey, as well as the atmospheric conditions inside each container” to give shippers a better understanding of their supply chain. The company also said an “an expanded version of the controlled atmosphere system was made available to the market, allowing shippers to bring more produce types to new markets.”
In April, MCI said Chiquita has invested in 2,500 of its new reefer containers, which are 35 percent more efficient and will improve banana quality.
It added that 1,000 of the containers are equipped with a controlled atmosphere system that ensures an extended transportation window of up to 45 days and prolonged shelf life of produce in supermarkets. That is achieved by controlling the mixture of carbon dioxide, oxygen and nitrogen in the container. This is particularly important in certain types of products with high respiration rates, such as bananas, avocados, mangoes and asparagus.
MCI and Carrier Transcold said controlled atmosphere systems help extend shipping distances, opening new markets for farmers or buyers of produce.
Carrier Transcold also sells refrigeration units and controlled atmosphere systems to reefer container companies, such as Singamas. Its XtendFRESH containers work by removing ethylene in the container produced by ripening produce.
Singamas said during the second quarter of 2018 it will introduce a new assembled-on-site refrigerated container system jointly developed with Carrier Transicold.
In November of last year, MCI said Hapag-Lloy, had purchased 3,700 containers from it and that 1,000 of them will have controlled atmosphere technology.
Niklas Ohling, senior director at Hapag-Lloyd, said that will allow “extremely sensitive fruit such as blueberries and lychees to be transported to the desired level of quality and degree of ripeness.”
Environmental Friendly. A major focus of the manufacturers that make refrigeration units for containers is finding ways to make them friendlier to the environment by using refrigerants with a lower global warming potential, or GWP, a measure of how much heat they trap in the atmosphere.
While much of the discussion about climate change focuses on the ability of carbon dioxide to trap heat, many refrigerants have much higher GWPs and are long lived in the atmosphere.
Carbon dioxide has a GWP of one. An older refrigerant, R-404A, has a GWP of 3,922 and an atmospheric lifetime of 40 years, while a refrigerant used widely today in containers, R-134a, has a GWP of 1,430.
In February, Carrier Transicold said it would sell its new PrimeLine refrigeration units for containers with a compressor that also could be used with R-513A refrigerant that has a GWP of 631.
“Phasedowns of traditional hydrofluorocarbon refrigerants due to their higher GWP have raised concerns about their future availability and pricing, and some of our customers have indicated an interest in using R-513A as an alternative,” said Willy Yeo, director of marketing for global container refrigeration at Carrier Transicold.
The company said its new units “will be sold with R-134a, enabling customers to switch to R-513A at a time of their own choosing. Conversions require a simple kit that includes a software update and replacement filter dryer.”
MCI also said 1,000 of the 3,700 containers ordered by Hapag-Lloyd last year will be chilled by R-513A. Its All Star Cool reefer units can use R-513A with minor modifications or be ordered charged with the R-513A refrigerant, MCI added.
But Yeo said refrigerated container buyers that want to use an even more “sustainable refrigerant and also want to hedge against price and availability issues associated with synthetic refrigerants should first consider Carrier Transicold’s natural-refrigerant NaturaLINE unit.”
The unit uses carbon dioxide as its refrigerant, which the company claimed is efficient, quiet, has tight temperature control and a deep-frozen capability that goes to minus 40 degrees Celsius.
Maersk Line last September introduced what it calls “remote container management” technology to all its refrigerated cargo customers that combines location tracking with temperature and humidity monitoring from inside each of its 250,000 reefer containers.
Vincent Clerc, chief commercial officer for Maersk Line, said, “We are answering the wishes of customers for greater visibility in their supply chain, to allow them time to plan and otherwise run their business without worrying about their shipments.”
The company said as of February it had 1,200 customers using the technology, representing more than 55 percent of its total annual reefer volumes, and that the technology also will be installed on 80,000-plus Hamburg Süd refrigerated containers. It added that “new features are in development, including the ability to program automatic temperature adjustments during the voyage and even make cargo-impact assessments for customers when disruptions occur.”