Posts Tagged “dry freight”
Driven by efforts to catch up on North-South routes, reefer container rates have risen sharply through 2021, but in contrast to dry cargo rates, are forecast to rise further in 2022. Conclusions are found in Drewry’s recently published Reefer Shipping Annual Review and Forecast 2021/22 report.
Drewry’s Global Reefer Container Freight Rate Index, a weighted average of rates across the top 15 reefer intensive deep-sea trade routes, rose 32% over the year to 2Q21 and by the end of 3Q21 these gains are expected to reach as much as 50%.
But these advances are dwarfed by the recent surge in dry container freight rates which have seen average container carrier unit revenues more than double over the same period.
The resurgence in reefer freight rates has not been uniform across all trades. Pricing recovery has been particularly strong on the main East-West routes, where vessel capacity conditions have been noticeably tight. But North-South trades have generally seen less price inflation, particularly on export routes from WCSA, Central America and Southern Africa.
“In contrast to dry container freight rates which are expected to decline in 2022 as trade conditions normalise, reefer container freight rates are forecast to continue rising as price inflation feeds into North-South routes when long term contract rates are renewed,” said Drewry’s head of reefer shipping research Philip Gray. “Most reefer cargo on these trades moves on long term contracts.”
The key driver of reefer freight rate inflation has been capacity related, as perishables shippers have competed with higher paying dry freight BCOs for scarce containership slots, despite ample reefer plug capacity provision. Meanwhile, continued disruption across container supply chains has led to acute shortages of reefer container equipment, already challenged by the particularly imbalanced nature of reefer trades.
“We believe that these conditions are short term and will self-correct as trade normalises from mid-2022,” added Gray. “However, we expect reefer container equipment availability to remain an issue for certain trades during their peak seasons, as the global fleet is not expected to keep pace with rising cargo demand, despite record output of newbuild containers.”
These conditions have provided short term reprieve to specialized reefer vessels, as some BCOs have returned to the mode seeking relief from congested container supply chains. But despite these developments Drewry estimates that the specialized reefer vessel’s share of the perishables trade fell to 12% in 2020 and is expected to decline further into single figures over the next few years.
Hence, despite a 0.4% decline in global seaborne perishables trade in 2020 to 132 million tons, containership reefer liftings advanced 0.3% to 5.4 million tons. Further modal share gains and buoyant cargo demand will see containerized reefer traffic expand at a faster pace than dry cargo trade from 2022.
The contraction in overall seaborne perishables trade in 2020 was much milder than for dry cargo, demonstrating the stronger resilience of reefer trades to economic shock. The trade was particularly impacted by a shuttered hospitality sector which reduced demand for deciduous fruit, fresh vegetables and frozen potatoes, while Covid-19 containment measures cut crop production and fish catches.
Meanwhile, an outbreak of fusarium TR4 disease in the Philippines weakened growth in banana trades. But cargo demand was supported by a booming pork trade, owing to African Swine Fever driven imports into China.
Seaborne reefer traffic picked up through the first half of 2021, expanding 4.8% over the previous year, led by meat, citrus and exotics trades but is not expected to expand at the same pace as dry cargo through the remainder of the year as it is not recovering from as deep a contraction in 2020.
Jerry Cravens has been trucking since 1991 and as an owner operator since 2002. After all these years, he is fueling at an Atlanta truckstop before picking
up his first load of produce.
Leased to A.L. Smith Trucking of Versailles, OH, Jerry is picking up a load of tomatoes from a Del Monte warehouse in Atlanta for delivery to another Del Monte facility in Winset, NC. At the Winset warehouse, he’ll load more fresh produce and head to Del Monte’s operation in Columbus, OH.
The closest Jerry has come to hauling produce was about 20 years ago with a load of cheese. Since then his focus has been with dry freight.
As Jerry was preparing to pull out of the truck stop and head to the Del Monte warehouse, this writer forgot to get his contact information. It would be very interesting to see if his first produce load would be his last. Or just maybe he found a new challenge after all these years that he really likes!
Jerry fully realizes hauling perishables “is definately more challenging than pulling a dry van.” He decided to haul produce on the recommendation of a friend who had “made good money” over the past year leasing with A.L. Smith.
Jerry says his career as an owner operator has succeeded by being careful whom he hauls for and taking the most profitable loads.
Over the years he has considered obtaining his own operating authority, but he has known too many truckers who have tried it and failed.
Prior to trucking Jerry graduated from high school, then enlisted in the U.S. Navy for four years, before transferring to the U.S. Army for another six years.
Between the experience in the military and his time hauling dry freight, he seems confident he is prepared to enter the world of produce trucking. Jerry is aware of the “weird hours” and delays often associated with loading and unloading fresh fruits and vegetables, plus plenty of other issues at the docks. He has been briefed on important factors such as maintaining the correct temperature for his load of tomatoes he’ll transport in a 53-foot Utility trailer equipped with a Carrier refrigeration unit. The trailer is owned by the company to whom he is leased.
As Jerry was finishing fueling his truck, he was asked if he had any advice for anyone looking to enter trucking and wanted their own truck. He advised they first learn the industry as a company driver.
As for buying a tractor, he advised against purchasing a new one. He cited the high monthly payments as a primary negative with a new truck, along with the higher down payment required. Jerry also cited other factors such as lease-purchase plans “where you will end up paying too much. Buy a new truck and it is hard to come up with those $1800 per month truck payments.”
Jerry practices what he preaches. He owns a 2001 Kenworth T-600 with a 250-inch wheel base and a 13 speed transmission. His truck payments are $500 per month.
“If you own your own truck you always have a way home,” he surmises. “I’ve seen too many of these company drivers fired while on the road and have had to find their own way home.”