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Dynamar (2018) REEFER Analysis - Market Structures, Conventional, Containers




It is no secret that the conventional reefer segment has faced challenge upon challenge over the past years. Familiar challenges, such as increased competition, an aging, shrinking fleet and high operating costs on low returns are mixed with new challenges, some specific to the reefer industry, but others faced by the shipping industry as a whole.

The year 2020 is fast approaching and carriers must prepare for the global introduction of the new IMO sulphur regulation, which will reduce the maximum allowed sulphur content of the fuel they burn from 3.5% to 0.5%. While there are alternatives to the potentially expensive low sulphur fuels, such as scrubbers or alternative fuels, implementation costs are high. The new IMO 2020 low sulphur regulation will prove to be a challenging regulation for operators who already struggle to remain afloat, financially speaking. Containership operators aim to raise their income by introducing low sulphur surcharges, separating the fuel costs from the freight rate and effectively offloading extra costs on their customers. For conventional reefer operators, there is no easy way out. Scrubbers and LNG are no option for the aging reefer fleet, which leaves expensive low sulphur fuel as the only option. Aside from issues such as fuel availability and compatibility, the conventional reefer segment will have to face the substantial increase in fuel costs, which already makes up a large part of their expenses.

To face the ongoing competition of containers, conventional reefer operators will have to rely upon their strong points even more than before. They are set apart by their high level of expertise and ability to ship in bulk with direct and fast connections. Notwithstanding, some operators may decide to scrap their oldest, least efficient ships, or may even decide to leave the business completely. A switch to containers is also an option, but such a move by Seatrade turned out to be far from successful. It was either forced to withdraw from routes on which it operated containerships, or forced to go back to using conventional reefer tonnage. This failure, among others, has seen Seatrade lose its leading position among conventional reefer ship operators.

In the container segment, economies of scale continue to play a major role, although not as much as in the past. Investigation into the relevant reefer trades shows that while smaller ships still dominate, the average vessel size continues to grow. However, in some of the trades where big ships are already customary, the average vessel size is actually in decline. This is amongst others caused by the takeover of Hamburg Süd by Maersk Line, which forced them both to withdraw from services for antitrust reasons and local cabotage laws.

Whatever will happen, the period leading up to 2020, and the months after will be an exciting one. Will container operators be able to recover the extra low-sulphur fuel costs from the shippers? Will conventional reefer operators successfully defend their market share, or will the new regulation finally trigger the long-expected demise of the conventional reefer ship, leading to long queues to the beaches of India, Pakistan or Bangladesh?

All this and more can be found in Dynamar's recently released latest edition of its always well-received annual reefer trade study.

'Dynamar (2018) REEFER Analysis - Market Structure, Conventional, Containers' reports on 236 pages in-depth on anything reefer relevant, including:

-          Historical and technological developments in reefer shipping

-          5-year perishables trades volumes, worldwide, by area and by country

-          5-year seaborne trade, conventional, containers, and related port infrastructure

-          Conventional reefer and container ship fleet development and forecast up to 2030

-          Top 15 conventional reefer ship operator profiles

-          North/South Reefer heavy container trades, per carrier and overall

-          Top 15 reefer container operators

As usual, Dynamar's Reefer Analysis applies the most recent trade statistics on reefer commodities, supplemented with up-to-date port, vessel, box and carrier fleet statistics. It delivers a profound insight into the background, characteristics, goings and present status of the worldwide perishables shipping market and its most relevant players.


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