Reefer ships versus containers

In recent years, more and more fruit and vegetable products have been transported
in containers. What is the effect of this on specialised cooling ships? Yntze Buitenwerf of
Seatrade, the largest company with specialised reefer ships, tells us how the market has
developed in recent years and what the consequences of this are for Seatrade.
Companies with traditional cooling ships have had a lot of competition from container
companies in recent years. At the beginning of the 90’s the discussion on whether or not the
market would be taken over by the container companies started. Container lines started
growing and then started taking reefer containers too, but the reefer industry wasn’t just
sitting there. Yntze Buitenwerf, general manager of Seatrade, says that many reefer ships
were built in this period. The advantage of reefer ships compared to ‘normal’ container ships
is that they last longer, he says. “Because they transport food the ships are always in top
shape. Much more so than ships with a dry load,” he adds. “This way you can have the
ships sail for longer. Usually around 30 years.”
Despite this, there has been a huge consolidation over the last few years. Buitenwerf
knows that at the beginning of 2000 there were over 20 companies worldwide who were
specialised in transport with reefers. Now there are only eight. “Because money could be
made more easily with other ships, some companies no longer invested solely in reefers.
For instance, every dollar that they put in a bulk carrier, was made back in two years. With
reefers on the other hand, it can take twenty years to earn it back. So they thought: why
take the hard road? The result was the many companies opted for other maritime segments
rather than the specialised reefers.”

This caused a considerable reduction in the traditional cooling ships. Very few
reefers have been built recently, whilst the age of the ships increase. This means the
number of ships is decreasing.
A lot of demand
Despite all of these developments, Seatrade has always continued to focus on the reefers.
Buitenwerf indicates that the company operates on the reefer market with over 120 ships at
the moment. “We transport 8.2 million tonnes of reefer shipments on a yearly basis. And
this is a huge gap between the second place - 33 ships - and third place - 23 ships – in our
branch”.

According to Buitenwerf there is still a lot of demand for transporting goods overseas. “The
demand grows by 4 to 5% each year. This has been going on for years. I remember well
that that number was at 69 million tonnes eight years ago. Now it has grown to well over
100 million tonnes. But the growth has gone almost exclusively towards containers. Since
2005-2006 you can see a backlash in the capacity of our types of ships.”

Yet according to Buitenwerf there are also positive developments in the reefer branch. He
indicates that the container lines have been building fanatically in the past few years. Each
line isn’t building specifically for the transport of reefer shipments, but is building based
purely on dry loads. “A container ship still has over 90% dry load on board and only a very
small percentage of reefer load. This automatically means that you can only ship a reefer
load if there is enough dry load to be shipped. This also means that if there is little or no dry
load, you have to sail with a ship that can only take reefer load. This added to the fact that
the container lines have started sailing more slowly in recent years due to the oil prices, but
also because they have created an over capacity, offers chances for the reefer branch.”
Speed is important
Buitenwerf knows there have been rumours that it has been going badly, as part of the
market segment is being lost. “But we’re not sad. We want to be able to do our business in
a profitable manner. As more and more customers are opting for specific transport and want
the goods to be at the final destination as fast as possible, speed is becoming increasingly
important.”
He says that this speed was offered by certain container lines a few years ago, but now
they all do slow streaming. “At the same time there are more and more customers who say:
it’s no good to me if my shipment ends up at a big terminal like the Maasvlakte. It will take
two more days for the shipment to get out. It’s also expensive, as you have to pay all kinds
of charges.”

The general manager indicates that a big part of the fleet sails in COA's (Contract of
Affreightment). This means that a certain amount of shipments are shipped out in a certain
period, without knowing exactly how much is going where. “We do this a lot with bananas.
We will have a lot of bananas planned for the year, but won’t be entirely sure how it will be
shipped. With flexibility in the fleet we can handle this.”

More interest
Due to the change in the container industry and the slow sailing, Buitenwerf can see that
there is now more interest for their type of ships. This also has to do with the raising of the
price for reefer transport by container companies.

“Container lines have priced their reefer products very low in recent years, because they
were trying to get their boats full. Last year Maersk said: ‘What are we doing? We’re making
a loss on every reefer box we transport. We can’t invest in a reeferbox if the prices stay the
way they are.’

Buitenwerf adds that the reefer containers are hugely expensive. Whereas a regular
container costs around 4,000 dollars, a reefer container costs around 20,000 dollars. “To be
able to invest again, Maersk said that 1,500 dollars per box would have to be added. We
thought that was good news of course, especially as we’ve been saying that the products
were priced far too low for years, and have been subsidised by dry load.”

Now Maersk, like other companies, has put up the tariffs. Buitenwef knows that they didn’t
get the 1,500 everywhere, but that they did put through substantial raises. “Now container
companies are saying that they won’t invest again if they don’t get the 1,500 dollars. So
even in the reefer containers there is a shortage.”

But is the reefer container the cherry on top for a big container ship or is it extra baggage?
“It’s exactly the same as with dry load. As long as the prices stay the way they are, it’s no
cherry on top. It’s extra baggage. The net yield of a reefer container is barely higher than
that of a container with dry load. But they have to invest extra for it.”
Profitable
As far as the market is concerned the general manager has noticed that countries like
Russia are coming to Seatrade more and more often. “Over the next few months we will be
transporting 150,000 pallets with citrus from South Africa to Russia. There’s also all sorts
going to Russia from Chile. In a period of three, four months we are transporting 60,000
pallets there. There are also 90,000 pallets of citrus going from Argentina to Russia. And
this is definitely the same quality as that which comes here.”

Seatrade is not yet doing anything with India, simply because the company has not yet
thrown itself into this world market. “We only have a limited number of ships. But what we
do have, is sailing profitably. And there are very few container lines making money at the
moment.” Buitenwerf looks towards Seatrade’s future positively. The motto is that they offer
fdd services: fast, directs and dedicated. “In this way we are distinguishing ourselves from
the container industry hugely. I always say; you can take the taxi or the bus.”

He names Seatrade’s speed as a big advantage. He indicated that the company, depending
on the port, sails from Chile to Europe in 15 to 16 days. The fastest container line couldn’t
do it within 25 days. Seatrade sails to Europe from New Zealand in 27 days. Two years ago
the fastest container line did this in 32 days, but due to the ‘slow steaming’ this has risen to
42 days. According to Buitenwerk the difference is becoming that big that it is affecting the
quality of the products.
He believes the oil prices are the biggest threat. “They are the most expensive part by far.
And because we sail quickly, we use the oil necessary. But because we often only have one
loading and unloading port, we don’t hang around. You have to weigh it up.”

Another threat is the closing of cooling houses, or cold stores. To combat this, Seatrade is
trying to form alliances in various to ports to ensure the cold store of loads. “So much has
been added to cold stores that there is too much capacity. At home too. And this is a
shame.”