Conventional reefer shipping enters new era as specialist logistics providers

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The world’s largest fruit producer Dole is set to place an order for three new reefer vessels as its seeks to modernise its fleet.

Details of the order remain scarce, but Dole said that its board had approved a $165m investment in “three new specially built refrigerated container ships” for its US west coast operations, which will be delivered from 2015 to early 2016, as Dole seeks to reduce the average age of its fleet.

Dole president and chief operating officer Michael Carter said: “Updating our west coast shipping capabilities is very important strategically to the company’s competitive differentiation and future growth prospects.

“These ships will be 27 years old at the time of replacement. The new ships will be more fuel efficient and will be built to Dole’s exacting specifications and design, with a 770 feu capacity (compared to the replaced ships with 491 feu) and equipped with gantry cranes.”

The order further adds to a sense that the decline of the global conventional reefer fleet might have bottomed out, and at the recent Cool Logistics Africa conference in Cape Town, Seatrade Reefer Chartering general manager Yntze Buitenwerf argued that the global transport of fresh produce is set to divide neatly into three separate segments, as conventional reefer carriers restructure their business models into providing specialist reefer logistics.

He predicted further newbuilding orders, although cautioned that this might not bring about a revival of the conventional reefer vessel. “There will be newbuildings, although the type of ship will not necessarily be the same as has been built in the past 20-30 years. We are talking about specialised reefer logistics, not specialised reefer ships – it’s all about how fast and how direct one can go to your destination.”

He said that new types of vessels were on the drawing board and pointed at those currently being converted for African Express Line (AEL), previously reported in The Loadstar here, as one example. “There will be newbuildings, the latest ones delivered are two years old and we have lengthened ships, and AEL has copied the idea – which we like, because it means it’s a good idea.”

Mr Buitenwerf argued that the current overcapacity in container shipping was resulting in conventional reefer operators redefining themselves as specialist reefer service providers.

“Container ships carry reefers well, but it is a different mode of transport. But they got into the market of specialised reefers, so we started eating into the air freight business by launching new services. When fuel prices went up the container lines realised that the costs were far higher than they had anticipated, and they went to slow steaming; when fuel prices further increased they went to ultra-slow steaming; then there was the overcapacity and they countered this by extending their schedules – so they went from ultra-slow steaming to now, where they are more or less drifting over the oceans.”

With global reefer volumes set to continue to grow in the order of 3-4% per year, he predicted that the current annual conventional reefer volume of 30m tonnes per year would likely further decline as container lines ate into the conventional market share, but said that modal shares would likely stabilise at 3m tonnes per year for airfreight, 20m tonnes per year for specialist reefer carriers and 90m tonnes for container carriers.

The decision for shippers, he explained, would be about service levels. “Certain types of fruits, such as table grapes, will continue to be air freighted. For shipping, there is a real difference in transit time. We sail from Peru to the UK and Europe in 13 days. The fastest container lines does this is 21 days. In the old days we were taking 26 days from New Zealand to Europe, the fastest container line at that time did it in 31 days, a small difference. Today it is over 42 days, due to slow steaming.”

He also explained how, compared with the container lines’ average of three to four reefer container trips per year, specialist operators get far higher usage from their equipment.

“In Belgium you can offload 300 containers, strip them and reload them in 24 hours. We use one box close to 14 times per year – but the container basically stays with the ship, which reduces your costs per container substantially,” he said.

He admitted that his company had also raised rates, by 30%, in response to escalating fuel costs. But he said this was no different to the series of general rate increases announced by container carriers at the beginning of the year, and that there would always be a section of shippers prepared to pay a higher price for a premium service.

“It is the choice between a taxi service and a bus service. We are not asking for a high price because we want to become filthy rich, but to cover the cost – we are doing the same as CMA CGM and Maersk, but it’s a different price. If you take the taxi you pay more.

“Specialised reefer services are all about fast, dedicated services. We go with relatively small ships, straight from the load port to the discharge port. We don’t go to the container terminals – we try to avoid them actually.”