There has been a “paradigm shift” in the reefer business according to Maersk’s Bill Duggan. And there’s a lot more change to come in the market, just ask Apple, which ships IPhone 5s in reefer boxes. By George Lauriat, AJOTBill Duggan, Maersk vice president of refrigerated services North America, has been in liner shipping for over thirty years and has seen a few changes. But as he explained in an AJOT interview, the current global reefer business is vastly different than the one of just a decade ago and is on the cusp and even a more dramatic shift.
Bill Duggan
Simply put there will be a great deal more temperature-controlled freight heading to emerging markets than is the case right now. The future trend is being driven by the rise of the middle class in emerging markets like China, India, Russia, Africa and South America. Duggan attended a seminar hosted by Coco Cola, (Maersk is a prime transportation vendor for Coco Cola) which forecasted the middle class would add a billion people over what it is today by 2025. “The middle class in emerging markets is going to want to feed their families like the middle class around the world… they will want their standards to be the standards they see in other parts of the world,” Duggan noted. Yes we have some bananasDuggan says there’s been a “paradigm shift” in the way perishables have been handled and points to bananas as the example. Less than a decade ago 80% of the bananas shipped, were transported break bulk and only 20% by container. There were some inherent disadvantages to the system. The shipper had to assemble the freight for a very specific ship on a timetable that offered little flexibility. On the other end the bananas had to moved rapidly to storage to prevent damage before being loaded on trucks for final destination. If the shipper missed the cutoff date for the break bulk ship, it was a major disaster. Now 75%-80% of the shipments are by reefer container, which offers the advantage of flexibility both on the export and receiving side of the supply chain. Multiple destinations are not an issue with the reefer box and this simplifies distribution. The speed and range of the shipments also increased with the switch to reefer boxes. In the 1970s and well into the 1980s, the reefer box was often a twenty-footer but now forties are the norm and in the case of Maersk, high cube forties. There was no doubt that reefer shipments are more expensive than break bulk and currency – US dollar versus other currencies – has played a role in the shift in transportation and destinations. But the advantages on point-to-point basis through the entire length of the supply chain give reefers a huge edge over conventional reefer ships. Containerships now run upwards 1,700 reefer boxes (3,400 teus), which was a reasonable sized boxship only a decade ago. In 2011, Maersk launched a service between Ecuador and the Mediterranean and Black Sea that had the reefer space for some 600,000 cartons of bananas or around the same as three refrigerated ships. Generally, the freight rates for reefer containers have held up better than those of dry boxes, although the return at the moment isn’t very good. Maersk Line ceo Soren Skou in a speech on Sept. 25th at the Cool Logistics conference in Antwerp said the Danish-carrier would raise freight rates by $1500 per forty on January 1st 2013. Skou said that rates had not kept up with inflation or rising bunker fuel costs. Earlier in the year, Maersk announced the decision not to buy any new refer containers until 2013. A reefer box costs nearly four times that of a dry container and with the low returns and uneven economic global outlook Maersk decided against adding to the current reefer box fleet of 250,000 in the current year. Apple of your IPhoneIn many respects the advances in reefer technology are driving reefer strategy for