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A series of unprecedented freight rate rises, introduced by container shipping lines on reefer cargoes at the beginning of this year, has unsurprisingly proved to be a cause of considerable friction between carriers and their customers, and has further accentuated supply chain problems over the availability of reefers for perishable exporters.
The $1,500 per feu January reefer rate hike introduced by container lines was sold to shippers as ‘inevitable’, yet it had followed years of desperate attempts by some shipping lines – in an attempt to win market share from conventional reefer vessels – to keep rates apparently so low that returns fizzled out to virtually nothing.
The effect has been some kind of race to the bottom, a kind of ‘beggar-my-neighbour’ policy where ultimately none of the lines have been able to make money out of reefers.
But if shipping lines also prove incapable of making money in the dry freight business, is it not a little unfair to expect the community of perishable shippers to pick up the tab?
Producers and exporters of fruit in particular have been hit hard by the increase, even if anecdotal evidence suggests that some of the increases have subsequently failed to stick. Basic food items such as bananas and oranges are not known to pay the highest freight rates, but they are critical to the survival of economies and the livelihoods of whole communities, especially in Africa.
Why is it not possible to adopt a completely different tactic and look at a new concept that would allow both shippers and carriers to make peace, albeit temporarily?
A meeting held in Antwerp last month focused on a proposal to create a ‘grey reefer box’ pool, with the aim of improving reefer availability for exporters.
Hosted by foodcareplus, an Antwerp-based logistics service provider specialising in the food and fruit business, the seminar drew in a small group of carriers, shippers, lessors, freight forwarders, cold store operators, insurance brokers, consultants and even a port, and asked if an independently managed pool of reefer equipment could resolve some of the shortages shippers are increasingly faced with.
Many shippers cannot get reefer boxes when they need them unless they commit to large volumes in advance. As the reefer container sector is now increasingly dependent on the highly volatile fresh produce business, box availability seems to have become a serious bone of contention between the different parties.
The Coolstar understands that reefer availability increasingly plays an important role in negotiations with perishable cargo shippers.
In fairness, reefer container carriers have also helped many small shippers access export markets, which had hitherto been out of reach. As a result, the conventional system of shipping fruit in bulk has become increasingly expensive and is progressively being phased out.
As the conventional reefer shipping sector has in turn progressively scrapped older tonnage, there are risks that a vicious circle risks could be formed – as the thirst for reefer containers continues unabated, more perishable shippers are likely to be left ‘high and dry’ this year.
Without the means to export, more fresh produce than ever could be diverted to domestic markets, ironically depriving reefer carriers – both container and conventional – of their key cargo base.
The result of the Antwerp meeting – during which all the pros and cons of box pools, including potential loss of control, cargo insurance, and volatility were aired by the participants – was a decision to produce a white paper, on the basis of which a feasibility study should be commissioned.
Grey reefer box proponents argue that the system could work on certain trade lanes where trade and equipment imbalances are “working against each other”.
If properly costed, grey reefers could help bridge the widening gap between perishable cargo and containers. Reefer containers currently perform an average of four to five trips a year.
By launching an independently managed reefer pool, some of the repositioning angst that has plagued the sector for so long could be dispelled, allowing some tempers to cool down.
The poor intermodal record of reefers in general is another problem. Due to the preponderance of one-way traffic, the intermodal potential remains largely underdeveloped.
Could the grey reefer concept indirectly help unlock reefer intermodal potential?
It is well known that carriers experience difficulties obtaining backloads for reefers. Why not let the freight forwarding sector deal more with backloads and thus reduce dead-heading?
Apart from additional revenues, it would also emphasize the industry’s green credentials.
Originally posted on The Coolstar – visit us at www.thecoolstar.com