Reefer shipping remains resilient: Drewry

Reefer container freight rates continue to outperform the dry cargo trade despite an unprecedented contraction in reefer seaborne trade last year.

The divergence is forecast to continue over the next few years, according to Drewry’s Reefer Shipping Annual Review and Forecast report. "The normalisation of the reefer trade and resultant freight rate correction has proved more gradual than for wider container shipping, and reefer cargo demand has been steadily recovering since the start of the year, demonstrating the resilience of the trade."

Drewry estimates that total worldwide seaborne reefer cargo declined to 137.5 million tonnes last year, down one percent, the first time in over 20 years and compared to flatlining trade for dry cargo. "Supply chain disruptions, rising input costs and normalisation in perishables cargo demand after the peaks of 2021, all contributed to the decline. Key reefer commodities such as meat, bananas and fresh vegetables all took a hit in 2022."

Containerised reefer trade contracted 0.7 percent in 2022 as the continued decline in specialised reefer ship carryings cushioned the blow of weaker cargo demand, and broadly matched the fall in overall containerised liftings in the year.

"Despite such adversity, reefer shipping trade is recovering through 2023, supported by steady demand from a growing world population and the recovery of Asian economies, particularly the reopening of China. These positive developments have driven a return to year-on-year growth on every key reefer-intensive trade route so far this year, with seaborne volumes projected to rise 1.5 percent by the end of the year. Containerised reefer trade is forecast to expand at 2.3 percent, fast outpacing flatlining wider container shipping cargo demand."

Reefer container freight rates have been declining since their peak of Q3222 but at a more measured pace than for dry freight, the update added. "This is because reefer’s peak was less pronounced due to the greater prevalence of annual contracts while the stronger resilience of the less overtonnaged North-South trade routes, on which the majority of reefer cargo moves, has also helped. Drewry's Global Reefer Container Freight Rate Index, a weighted average of pricing across the top 15 reefer intensive deepsea trades, declined 22 percent to $4,840 per 40ft in the year to Q223. And initial indications show that the fall will have accelerated to 31 percent by the third quarter. Despite such corrections, reefer container freight rates remain some 60 percent above pre-pandemic levels while pricing for dry cargo has reached parity."

Containerised reefer trade is positioned to outperform the broader dry cargo trade with a projected average annual growth of 3.6 percent over the years to 2027. "As a result, the anticipated fall in reefer container freight rates will continue to be more measured than for dry freight, still leaving them above pre-pandemic levels next year."