Reefer supply shortage means rates set to soar

10/12/2017

Reefer rates are set to skyrocket, as the increasing pressures from carrier consolidation collide with acute shortages of reefer containers, according to new analysis by Drewry.

With half of the planned M&A activity among container carriers still to come into effect, and the typical reefer season cooling down after its peak in Q4 and Q1, Drewry’s Global Reefer Freight Rate Index increased by $52, or about 2%, from Q1 to Q2. Based on the preliminary data for Q3, the index will rise further as the slack season continues, the company advised, while, at the same time, the rates for dry vans are maintaining their normal seasonality, falling from Q1 to Q2 and rising again in Q3.

“Hence, the argument could be made that carrier consolidation by itself is not responsible for the rise in reefer rates, and that there has to be another factor,” Drewry explained in its latest Container Insight Weekly briefing. “That other factor, we believe, is a shortage of reefer containers.”

Data derived from Drewry’s Reefer Shipping Market Review and Forecast 2017/18 shows that, using 2010 as a base, 2016 is the first year where demand had outgrown supply.

“The number of reefer boxes joining the fleet was very low in 2016, at around 60% of its historical average for the last decade. And it will be low again in 2017,” the analyst noted. “Shipping lines and leasing companies are not collectively sitting by and letting it happen: there have been a few big orders recently and the reefer box manufacturers are now fully booked for Q4 deliveries.”

Drewry continued: “All of this is putting many reefer shippers in a particularly unpleasant spot: due to the perishability of their cargo, they are extremely sensitive to supply-side disruptions. And they have seen plenty of those of late.”

It said shippers were increasingly asking themselves whether they are paying too much for their reefer container shipments and how their reefer container rates compare to those of their competitors.

“That is why Drewry decided to launch a Reefer Benchmarking Club, where shippers and forwarders can now confidentially and anonymously benchmark their buying rates against their peers, with a trusted and independent advisor to the maritime industries,” the company explained. The first round of benchmarks will be made on rates for 4Q17.

Drewry concluded: “The need for greater transparency in reefer shipping pricing is growing as shippers face mounting cost pressures due to equipment shortages.”