Marjolijn Maliepaard joined the Reefer Development and Sales team at Shypple as Customer Success Manager at the beginning of 2022. With 35 years of experience in the shipping industry, including 20 years in refrigerated container (reefer) shipping, Marjolijn brings a wealth of business knowledge and expertise to her new role. She now helps Shypple's reefer customers to navigate the changing market.
State of the reefer container shipping market
Marjolijn, how would you describe the reefer container shipping market in 2022? How do things look and what challenges do we face?
"Reefer container shipping is a very stable market, because there will always be a need for fresh products, whether it's foods, pharmaceuticals or flowers and plants.
People all over the world now expect these fresh products to be available all year around. And that would be impossible without reefer container shipping.
It’s a very fast-paced, vibrant market. And it takes careful planning and management to control supply chains and maintain profitability.
We face some challenges at the moment, due to the pandemic and the overall state of the container shipping industry. Container prices are extremely high, and we’ve seen some customs-related challenges due to the pandemic (We’ll talk more about these topics below).
On the bright side, we also see new technologies on the rise that will help take some of the pressure off, especially when it comes to digital freight forwarding and better transport technologies."
New technologies in reefer shipping
Tell us more about those new technologies that help improve reefer container shipping.
"Visibility is one of the biggest challenges for any shipper. This is why it's so useful to have a digital freight forwarding platform. Our platform at Shypple lets our customers continually monitor and manage their shipments in real time. The many new customers that have joined us since we acquired Milestone Fresh are now enjoying those benefits too.
"There’s been a major shift towards end-to-end visibility over the last few years across the shipping industry. People want to be able to manage their supply chain with the same level of user-friendliness and technology as they are used to in other areas of their business. So, digital platforms will definitely have a more important role to play from now on."
The pandemic has sped up these developments. In the past, exporters would call and email their forwarder more often, or even send staff members to the destination port to make sure everything went according to plan. But with COVID, people were unable to travel or unable to be on location when the freight was unloaded. So, technologies like Shypple fill in the gap, because we give exporters more visibility throughout the transit.
Besides digital platforms, we also see continual innovation and improvements in container technologies, refrigeration systems and packaging."
How do reefer containers work now and how are they improving?
"All different types of fresh products require different types of containers and different preservation techniques. There have been significant improvements in those methods over the past decades.
Some reefer containers work by separating ambient air from the inside of the container until the container reaches an optimal balance of O2 and CO2. They also control the temperature and humidity. These are all factors that contribute to shelf life.
Other containers allow the products to naturally ‘respire’ which means they soak up the oxygen inside the container and breathe out CO2. Once the right balance of O2 and CO2 are achieved, the decomposition process is slowed to a minimum.
For some types of produce, like citrus, berries and kiwi fruits, it’s possible to use ‘cold treatment’. This means the fruit pulp is cooled very quickly to a specific low temperature for a specific amount of time and then back up again. The treatment kills pests, so there’s no need to spray pesticides onto the fruit.
Technologies like these are continually being optimized. We’ve also seen lots of improvements in packaging materials, which regulate gas exchange and keep the products fresher for longer.
Farmers are always on the look-out for new ways to extend storage life, so they can reach even more markets. For example, if a tropical fruit exporter in Central America has access to better packaging, they might be able to export not only to the Netherlands, but also to countries that are further away, like the Gulf Region."
Seasonality and reefer container shipping
How does seasonality affect reefer container shipping? How are things looking in 2022?
"To be profitable as an exporter of fresh goods, you’ve got to have the right balance of price, quality and demand. The weather is also an important factor. So, seasonality always has an influence on your business, whether you’re shipping within your own region or much further abroad.
Each fresh food has its own season in which it’s most likely to succeed, because all those factors align. Melons, for example, are often imported to Europe from Central America and their season is around week 5 to week 17.
Time-to-market is also crucial for fresh products. Take a fruit like mangos for example. They have a storage life of around 21 days , so growers have to get them to market fast to ensure they’re still profitable. They have to be sold within that perfect window of time, or else the grower risks taking a loss.
Other products, like fresh flowers, tropical plants, onions or apples, have a longer shelf life. But it’s still important to get them to market fast, so you can get the best price for them. The market for many fresh products fluctuates continually, so timing is everything.
With ferns and house plants, for example, demand is low around Christmas time, because most people in Europe have a Christmas tree that time of year, and don’t want to buy other house plants.
Demand for plants and flowers always rises in February for Valentine’s Day, and into the spring, when most countries have Mother’s Day.
"Despite the pandemic, reefer container shipping remains stable. Seasonality doesn’t change just because of the pandemic. What has changed is profitability. With container prices so high, there is a risk that some lower-margin products may be priced out of the market."
Importers might look for the same products in lower-margin markets. With melons, for example, instead of importing them from Central America, buyers in Europe might turn to growers elsewhere."
Freight rates and the pandemic
How has the COVID-19 pandemic impacted the reefer container shipping industry?
"The main change we’ve seen since the beginning of the pandemic is extremely high freight rates.
For example, Hapag-Lloyd recently announced that their freight rates nearly doubled from 2020 to 2021. That’s great for the carriers—Hapag-Lloyd’s EBIT increased by more than sevenfold last year. But it’s tough times for exporters.
Reefer freight rates were 50% higher in the last quarter of 2021 than they were the year before. With rates like that, a lot of people are worried that it won’t be worthwhile to ship their fresh products overseas."
Why are freight rates so high right now?
"There are a number of reasons why freight rates for reefer containers are so high at the moment.
First, the price for dry container shipping space has shot through the roof. This is because of the extremely high demand for dry goods during the pandemic.
So, carriers prioritize dry containers, because that is much more profitable for them right now.
As a result, there’s less space, but, maybe more important, there’s less equipment and workers available for handling reefer shipping. So, reefer exporters have to pay higher premiums and wait longer to get their products shipped.
Another factor has been the strict COVID policies in major countries like China. We’ve seen tougher customs rules, which cause delays.
There have been times where the Chinese have stopped all imports of pork from Europe, for example, because they claimed they were concerned about COVID safety. This has had a heavy impact on pork and fish farmers in Europe, who rely on the Chinese market. It also shows how policy decisions in one part of the world can affect the entire supply chain today.
And there have been occasional shutdowns in Chinese ports and terminals. This causes bottlenecks which have effects throughout the industry. If a port closes down due to a COVID outbreak, then right away we see a rise in ports that are omitted."
What are blank sailings and why are we seeing so many of them in 2022?
"Container ships sail according to a set schedule. They have a set number of days to complete their route and return to their base. Each time they stop, they also have a set number of days at the port to load and unload.
Now, imagine if a port like Ningbo in China has to shut down due to a COVID outbreak there, which partially happened last year and again in January 2022. When that happens, there will be congestion. Ships queue up outside the port and wait their turn to be unloaded and loaded.
But if port congestion is too high, it’s no longer economically feasible for a ship just to wait. So, that ship will return to its base and won't call at any ports in the routing. That’s called a "blank sailing" or "void sailing." In the most basic form, a blank sailing is when a vessel does not sail at all.
And when a blank sailing happens, whatever cargo was supposed to be loaded on that ship will have to wait for the next ship on their route. That ship may have limited space, which means extra costs to get the cargo loaded. Plus, the void sailing always causes a delay, which might be disastrous for a cargo of fresh produce.
We used to see blank sailings around traditional peak seasons like Chinese New Year. But in the COVID pandemic, an outbreak in China might lead to an unexpected lockdown. Then there may not be enough workers to service the ships, for example. Port congestion has been a constant problem during the pandemic, which increases the risk of blank sailings."
How can exporters avoid high freight rates in reefer shipping?
"In many cases, there isn’t much you can do to avoid high rates, because the rates are higher than usual across the industry.
Some exporters have started to try air freight instead of sea freight, because this enables them to get their goods to consumers while market prices are higher, so they boost profitability.
It takes a lot of precise analysis and planning to know exactly when you can optimize profits. This is another area where detailed control over your supply chain can help you react faster.
Working with a digital freight forwarder is the best way to maintain control over your supply chain right now. No other solution gives you the flexibility that it takes to succeed in 2022."
Top trends for reefer shipping in 2022
What are the top trends and topics for the reefer shipping industry in 2022?
"There are quite a few! Let’s start with COVID.
If we’re lucky, then COVID restrictions will continue to loosen in Europe and many other places by the summer of this year.
When that happens, people will spend less time at home, and we’ll probably see a drop in the demand for dry goods. After all, part of what’s been driving the demand for dry goods is the fact that more people have been stuck at home, so they buy more dry goods online for things like home improvement.
So, once things start to get back to 'normal,' dry container shipping will relax, and we should see a drop in freight rates all around. Hopefully this will happen in 2022, but it’s still too soon to tell."
That sounds like something to look forward to. Is there any other good news?
"Yes, we also see lots of positive developments when it comes to sustainability. This is a huge topic that affects all of us.
Consumers, policymakers and investors are all putting pressure on manufacturers and logistics companies to reduce carbon emissions and lower their environmental impact. This is especially important for us in reefer shipping, because it takes energy to climate-control all those containers.
Over the last year alone, we’ve seen some strong commitments from many of the big international shipping lines. We expect to see a much bigger shift toward biofuels across the industry over the next few years.
"At Shypple/Milestone Fresh, we want to help our customers operate more sustainably. That’s why we offer them the option of carbon insetting, where they use biofuels for their shipments through our partnership with Good Shipping. They can also participate in carbon offsetting by taking part in our reforestation project with ForestNation."
What inspires you most in 2022 and what are you looking forward to most this year?
"What inspires me: To see how local farmers embrace the Shypple platform right now. These are busy people and they need a reliable freight forwarding partner that can take care of everything for them, so they can focus on their core business. Many of our customers have been working in the industry for years and have joined Milestone Fresh in the last 15 years. It’s great to see how they benefit from our platform.
What I look forward to most: Being able to meet our partners and customers face to face again—hopefully soon! I can’t wait to get back on the road and meet people in person at trade events like Fruit Logistica in Berlin and Fruit Attraction in Madrid. After the last couple years, we’ll all have lots of catching up to do."