In the face of an unprecedented contraction in reefer seaborne trade last year, the reefer shipping sector has showcased remarkable resilience, with containerized reefer freight rates outperforming the dry cargo trade. These remarkable trends have been highlighted in Drewry’s recently released Reefer Shipping Annual Review and Forecast report.
Contrary to expectations, the normalization of reefer trade and subsequent freight rate adjustments have transpired more gradually compared to the broader container shipping industry. This steady resurgence in reefer cargo demand, evident since the beginning of the year, underscores the robust nature of this trade.
According to Drewry’s findings, global seaborne reefer cargo experienced a slight decline of nearly 1% to 137.5 million tonnes last year, marking the first such decrease in over two decades. This downward trend can be attributed to a confluence of factors including disruptions in the supply chain, escalating input costs, and a natural adjustment in the demand for perishable goods following the peaks observed in 2021. Notably, key reefer commodities like meat, bananas, and fresh vegetables bore the brunt of this decline throughout 2022.
In tandem with this challenging environment, containerized reefer trade witnessed a contraction of 0.7% during the same year. The ongoing reduction in specialized reefer ship capacities helped cushion the blow of weakened cargo demand, aligning closely with the dip seen in overall containerized liftings.
Despite these adversities, the reefer shipping industry has made a steady recovery in 2023, buoyed by consistent demand from a growing global population and the resurgence of Asian economies, particularly China. These positive developments have paved the way for a year-on-year growth in vital reefer-intensive trade routes, with seaborne volumes projected to rise by 1.5% by the year’s end. Notably, the containerized reefer trade is expected to surge at a rate of 2.3%, significantly outpacing the stagnant demand in the broader container shipping sector.
While reefer container freight rates have witnessed a decline from their peak in 3Q22, this descent has been more gradual compared to dry freight rates. The moderate nature of this decline can be attributed to factors such as the prevalence of annual contracts in the reefer sector, along with the increased resilience of the less saturated North-South trade routes, which witness the majority of reefer cargo movement. Drewry’s Global Reefer Container Freight Rate Index, which aggregates pricing data from the top 15 reefer-intensive deep-sea trades, revealed a 22% decline to $4,840 per 40ft container in the period leading to 2Q23. Initial indications further suggest that this decline is expected to accelerate to 31% by the third quarter. Notably, even with these adjustments, reefer container freight rates remain a significant 60% above pre-pandemic levels, in stark contrast to pricing for dry cargo, which has now reached parity.
The reefer shipping industry’s ability to weather the storm of 2022’s trade contraction and its subsequent recovery in 2023 is a testament to its resiliency, adaptability, and crucial role in global trade. As demand for perishable goods continues to rise and economies regain momentum, the reefer shipping sector is poised for a dynamic period of growth and transformation in the years to come.