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Production decline leads to fears of reefer box shortage

Production decline leads to fears of reefer box shortage

The global fleet of refrigerated containers is not growing fast enough to keep up with demand.

A shortfall in refrigerated container production has sparked fears that there could soon be a serious cold box shortage, speakers at JOC’s Container Trade Europe Conference in Hamburg said on Tuesday.

Frank Ganse, global director of reefer logistics at Kuehne + Nagel in Germany, said that reefer production levels in 2016 and 2017 are down 50 percent on previous levels, and that has created a shortage that will worsen in the fourth quarter of 2017 and the first half of 2018.

“What we have seen this first half of this year is a massive reefer container shortage, particularly in the northern hemisphere,” said Ganse, who said that the shortage could be the worst when “demand for fruit shipments is high in the southern Hemisphere” later in the year.

Ganse said the Kuehne + Nagel has seen only three companies invest seriously in reefers lately: Hapag- Lloyd, CMA CGM, and Maersk Line.

Rolf Habben Jansen, CEO of Hapag-Lloyd, noted that the company has recently placed an order for new reefers.

“We see there is a potential shortage and we are looking at more innovative ways to boost availability of equipment going forward,” Jansen told the audience. “I also think more investment in boxes is needed.”

Hapag-Lloyd announced on Sept. 15 that it had ordered 7,700 refrigerated boxes, of which 7,000 are 40-foot containers and 700 are 20-foot containers, with production to begin this month. One thousand of the new containers are equipped with technology designed to slow down the ripening process of various types of fruits and vegetables, allowing for a longer transportation period.

The company said that for the first time it will make containers in San Antonio, Chile, “a region in which they are in high demand.”

Research analyst Drewry said earlier this year that while demand is expected to grow, reefer container production decreased 60 percent last year compared with 2015, and questioned whether there was enough supply to meet demand.

“The equipment pool is becoming much more constrained,” Philip Damas, head of logistics practice at Drewry, said at the 2017 TPM Conference in Long Beach earlier this year. That “could mean growing problems with equipment availability.”

Damas said the demand growth is fueled by several factors, including population growth and a shift in eating habits towards consumption of more meat in Asia and Eastern Europe and healthier diets of more fruit and vegetables in developing countries. Some sectors that are increasing their use of reefers are chocolate and pharmaceuticals, he said, and there is a shift away from moving temperature-controlled cargo by air to sea.

Jim Blaeser, vice president at AlixPartners, also said the company has seen underinvestment in reefers in the industry. What is noticeable is that as carriers invest in mega-ships and they are not investing enough in reefers to go in the big ships, Blaeser told the TPM conference.

Jaime Overley, CEO of East Coast Warehouse, perhaps the largest temperature-controlled facility in the Port of New York and New Jersey, said he has not seen a shortage yet. However, “given the weather disruptions,” a temporary shortage may happen, due to “increased transit and hold times, which could affect positioning and flow.”

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