Ocean carriers are hungry for a slice of the growing pharma shipment pie

© Rattana Rueangha

Pharma is “a growth market” for ocean carriers as shippers become cost- and emissions-conscious, but temperature and time-sensitive requirements could mean a liner’s “piece of the pie” will only be a sliver.  

Cathy O’Brien, VP of international sales at UPS Healthcare, told The Loadstar the demand for cold-chain transportation and handling was “growing rapidly”. 

“If we look to the future, more than half of the drugs in development are biologics, which require development in cold chain and temperature monitoring services… the demand for precision logistics is only set to grow,” she said. 

And ocean carriers, threatened by the overcapacity looming in the market, are keen to tap into this growth sector and establish themselves as primary movers of pharma products.  

In Transport Intelligence’s (Ti) recent global freight forwarding survey, pharmaceuticals were reported as the third-most likely vertical to offer the best prospects for volume growth in sea freight over the next five years, after tech and consumer goods. And 11.9% of respondents said pharma offered the best prospects. 

But in 2022, according to Ti, air freight accounted for around 50% to 70% of pharmaceutical tonnage carried, and that transportation of pharma “remains a key battleground”.  

And the intelligence platform noted: “Ocean carriers have their sights set on the lucrative pharma market,” .  

Indeed, the director of marketing and communications for ocean carrier ONE, Stanley Smulders, told The Loadstar: “Pharmaceuticals are one of the commodities where shipping lines are actively and effectively expanding their market share… the pharma industry is driving significant growth in our reefer container business.” 

Mr Smulders explained that reefer containers had “revolutionised how temperature-sensitive goods [are] transported, replacing the need for conventional reefer ships”.  

He said: “We see increasingly that many pharma logistic companies are embracing this opportunity and shifting from air to sea transport.” 

Gaetan van Exem, global vertical head of pharma and healthcare cold chain at Maersk, said the Danish shipping line had noted “a big transition from air to sea transport going on in the industry”.  

He told The Loadstar: “The main drivers are clearly to reduce costs and emissions in the supply chain,” 

But, despite cost- and emission-saving benefits, ocean carriers could struggle to increase their market share of pharma shipments, due to some emerging logistical hurdles that make it incomparable to airfreight.  

One of the main hurdles, a knowledgeable source said, was the “limited temperature range” of reefer containers, with many new products needing to be transported at “up to –80ºC and beyond”. 

And a shift to “multiple production site approaches” had seen manufacturing locations emerging in places such as Eastern Europe and Mexico, “which aren’t particularly conducive to ocean”. 

“With the high costs of these shipments, there’s also a premium on an ability to monitor individual packages and an ability to re-route them as necessary – again, which is a bit harder in ocean,” the source added. 

“I’d say there will be an uptick, maybe not just as much as the ocean players would hope. There’s certainly a growing chunk of the market which fits ocean’s timeframe and the current capabilities of reefer containers, but overall, I don’t think it will be as large as ground or air freight can offer.” 

The worldwide healthcare logistics market is set to go from the $130bn in 2023 to around $152bn in 2026, and the source added: “Even if ocean shippers can capture a small part of the pie, it’s still a decent amount of money.” 

And, despite not being able to overtake airfreight as the key provider of pharma transportation, the two could be a useful complement for each another. In fact, Ms O’Brien noted that “taking a multimodal approach” was one of the best ways a shipper or forwarder could ensure resilience. 

A spokesperson from Kuehne + Nagel told The Loadstar: “In the healthcare industry, we see modal awareness has increased, especially for multimodal solutions such as sea-air logistics, to strengthen supply chains as a result of learning from previous disruptions.” 

Indeed, Mr van Exem told The Loadstar that, while the air to ocean shift was growing, “only products with sufficient stock and planning, and which have typically been on the market already for some time, will potentially move through ocean freight”. 

According to him, there is an “even stronger trend” toward close partnerships with multiple logistics providers, which can offer “a lot of services”, and he added: “Multimodal transport, like sea-air solutions, also help to reduce emissions as well as costs versus pure air freight all the way.”