Reefer ocean container business back on a stable keel
With 2023 rolling into the calendar, there’s been a return to the fresh produce shipping normalcy of 2019. It’s no secret that the Covid pandemic has rocked the sea freight of produce in 2020.
Ed Treacy, vice president of supply chain and sustainability at the International Fresh Produce Association, based in Newark, DE, told FreshFruitPortal on March 9, “The ship has corrected in terms of pricing and availability,” which is a drastic turn from Days passed when sea rates doubled, tripled and then in some cases were ten times the norm!
Containers and chassis are no longer a shortage.
“The main deficiency now lies in the quantities. The lines added capacity to take advantage of the exorbitant interest rates and I think global inflation showed the overall demand for products and volume was falling. The residues have been removed. And on-time deliveries, which are defined as within a day of schedule, are mostly back,” Treacy said.
Treacy notes that before Covid, shipping companies were on time 75% of the time. In the worst times during Covid, there were on-time deliveries about 10% of the time, depending on the shipping company and shipping route. “Things have improved since the new year” to about 60-65% on-time. Shipping companies admit they need to increase that number to 90%.”
In Long Beach, February 27-March 2, Treacy was a panelist at TPM 22 – the Trans-Pacific Maritime Conference.
He says the shipping companies have learned a lot in recent years. They maintain better practices and don’t allow past mistakes to happen again. Figuratively, Treacy notes that the shipping companies “were trying to pour 25 pounds of fruit through a 15-pound funnel. They couldn’t handle the volume.”
Significant for the deficit were ports that were closed and ships that lay in a port for days waiting to be unloaded. This eliminated fruit and container volumes and reduced shipping capacity.
Late that winter, shipping companies confronted with low cargo volumes canceled routes with only three or four weeks’ notice to exporters.
Treacy explains that the shipping companies made $150 billion in the two years at high rates. Investors are putting pressure on the lines to maintain this level of profitability. Reducing container capacity will increase rates and profits. “I hope this doesn’t go on,” notes Treacy.
Treacy believes overall shipping volume will pick up again this September, “everyone wants to do what they can to stay on schedule.”
Creation of “Fast Lanes” for products
Produce is the most perishable item handled by ocean lines. At the TPM conference, Treacy encouraged shipping companies to create “fast lanes” for produce to expedite outbound reefer containers from the dock and then unload them first at the receiving end for customers who need to get the fruit to market.
“We’ve had a lot of shipments that ended up with insurance claims because the delays were too long and the products weren’t salable.” In these cases, well-insured shippers or carriers covered most of the immediate losses.
With the problems, the fruit and vegetable industry shyed away from exporting. Certainly US exports have fallen. While the figures may show a 2% increase in sales of product exports, the product industry can actually face up to a 10% drop in export volume under 10% to 15% inflation. Rather than face transportation problems, some growers left fruit and vegetables unharvested in the field or on trees to minimize their losses.
“It will take a while before we regain our confidence” to export. And exporters of citrus and apples have largely stayed in the export game. The suppliers of cherries and vegetables could not afford the risk of shipping delays.
Treacy encourages IFPA fruit and vegetable industry members to choose their shipping companies on more than price. In times of shortage, these good partners bring fewer challenges than those working in the spot markets.
We hope that stability will be maintained and the service will go back to or above what it was before.
The reefer niche allows shipping companies to charge a profitable premium. “I can’t see them leaving this business, although one or two have gone in the last year or so because they got more for dry containers.”
Production and future refrigerated transport
Treacy states that six or seven percent of all sea containers are refrigerated. Fresh produce is a subset of this refrigerated volume. Premium rates are charged for the products as these containers cost more and there are insurance expenses to cover the risks.
“I think the shipping companies will not ignore the products in the future. It’s a profitable item, but Covid has taught us what to do when handling produce.” At the same time, there is greater innovation from seaports and ships to accommodate fresh produce. He points out that extensive container racking has been set up in Dubai to serve reefer container customers and optimize access to the containers most in need of rapid movement. The alternative, of course, is to stack refrigerated containers in large blocks, which is a major challenge and requires waiting up to two days for a container to be retrieved when it comes time to launch products.
The use of refrigerated general cargo vessels increased over the course of approximately 18 months due to Covid disruptions to maritime transport. In some of these cases, fruit that had been shipped in refrigerated containers found itself on pallets in refrigerated holds. The old standard technique requires more touches of a perishable product. The advantage of general cargo ships is that less volume is required to carry out an efficient shipment.
Treacy believes that reefer break bulk will only ever make up a small percentage of trades, but he doesn’t see a trend in the recent increase in usage.
Some efforts will be made to align logistics data requirements throughout the supply chain, no matter the shipping company or carrier, they will work with the same dataset.
Covid emphasized the fact that everyone in the company had different data on how to transport cargo. When a shipment changed from one carrier to another, all of the shipment’s data had to be entered a second time.
“We have to get beyond that,” says Treacy.
Global goods transport
Treacy has a background of almost 40 years, primarily in retail logistics. Since 2010 he has been working for the Produce Marketing Association, which has merged into the IFPA. He says refrigerated ocean freight is the second or third most common shipping method for perishable goods. If flower products are counted, sea freight moves a third behind truck and flower transport volume.
The shipping of products by sea naturally takes place “every day around the world”.
Treacy works with all IFPA members based in 56 countries. The shipping routes of his concern not only include North America, but also routes such as Mexico, Chile and South Africa that ship to Europe. Surrounded by oceans, Australia and New Zealand are also important parts of IFPA’s strong membership.