Reefer container freight rates to rise in 2022
A recent report by Drewry, revealed that the average rates across the top 15 reefer trade routes rose by 32% year-over-year in the second quarter of 2021, surpassing dry cargo rates. Drewry’s report projects that these increases will rise to as much as 50% by the end of the third quarter and continue to increase into 2022.
Increases in freight rates have varied depending on the route. Prices for North-South routes, for example, have not increased as much as the East-West routes, though this is expected to balance out in 2022. Limited capacity on North-South trade routes has naturally placed a strain on perishable shipping companies. Pressure which has been exacerbated by limited availability of reefer containers and their components in the supply chain.
Refrigerated container cargos expected to grow in 2022
According to the MarkNtel Advisors' research report, "Global Reefer Container Market Analysis, 2021," the market is likely to grow at around 8% between 2021-26. This is mainly due to the increasing demand for perishable goods, though the rise in e-commerce and advances in tracking technology are also creating an impact. There is also increased demand resulting from a lack of air transportation which refrigerated cargo shipping can accommodate due to improvements in technology. In addition, rate increases are high due to the fact that reefer containers are now also being used as regular, dry containers as there is a shortage of dry containers across the industry.
Reefer shipping has not suffered nearly as much from the impact of the COVID-19 as dry shipping. Global lockdowns meant consumers had more time, and more interest in home improvements, and a pressing need to kit out home offices. This hit dry shipping logistics hard. The demand for fresh foods remained relatively steady with an increase of 4.8% year over year in the first half of 2021, as a result of increased appetite for meat, citrus, and exotic fruits. Fresh Del Monte Produce, for example, enjoyed a gross profit increase by 40% and a profit margin increase by 33.3%.
Reefer shipping benefits from prioritized stowing making it less likely to experience bottlenecks when shipping refrigerated items. This bodes well for reefer shipping companies in 2022, though there are still challenges with labour and space constraints to overcome. And, of course, the supply chain could experience further pandemic-related obstacles, as the world inches its way towards a new normal.
Highest growth expected in the pharmaceutical sector
Reefer shipping is critical to the pharmaceutical industry which needs to transport temperature and humidity-sensitive goods securely around the world. This includes vaccines, which will continue to play one of the most critical roles in the recovery from the COVID-19 pandemic. Experts report that the refrigerated sea transportation market will experience a Compound Annual Growth Rate (CAGR) of over 4% by 2022 with the Pharmaceutical Industry enjoying the fastest growth, globally.
If you are confused about what the CAGR means, you aren’t alone. The compound annual growth rate (CAGR) is the mean annual growth rate of an investment over a specified period of time over one year. It is one of the most accurate ways to calculate and determine the returns expected for individual assets, investment portfolios and anything else that can rise or fall in value over time. So, in this case it refers to the financial returns expected by the sea transportation market in the coming year.
Reefer shipping companies will increase investment in Internet of Things (IoT)
Critics may say that the supply chain sector has been slow of the mark with adopting AI and other emerging digital technologies. The shipping sector has enjoyed considerable profits in the last two years. Money which can be invested in digital transformation such as investment in IoT, improvements in Track & Trace and other emerging technologies. IoT has the potential to significantly improve certain aspects of reefer shipment tracking, such as real-time updates on cargo temperature, humidity, carbon dioxide, light, shock and vibrations.
It is important to remember, however, that these advancements only form one aspect of the technology required for refrigerated container cargo shipping. In 2021 global shipping giant HMM announced its intention to pilot IoT technology in its frozen and refrigerated shipping containers. HMM will test the technology on 1000 reefer containers over a period of 1 to 2 years. If the pilot proves successful, it is likely to encourage other reefer shipping companies to trial or adopt IoT for their own fleets.