The COVID-19 pandemic has caused prices for refrigerated shipping containers to spike, says the partner of a Canadian company that buys, sells and rents new and used shipping containers. Before the pandemic, for example, Containers Unlimited could buy a 40- foot reefer and sell it for $12,000 “and make our margins,” said Alun Brown, VP, Operations. “At one point through the pandemic, they were up around $20,000 for the same unit.”
The reefer market, though, hasn’t been hit as hard as dry cargo storage containers, he said. In Halifax, where the company is based, a 40-foot high- cube double-door container would fetch $6,600 two years ago. “Right now, we’d have to charge upwards of 13,000,” said Brown, who lives and works in Vernon, B.C., with business and life partner, Julie Millington, the owner, President and CEO of Containers Unlimited.
SHORTAGES IN MANY PLACES
Those in the refrigerated container business often face a shortage of reefers in a lot of places, notes a recent reefer market update from DHL Global Forwarding.
But is it a shortage? asks the May- June 2022 report. “Actually, the final conclusion is, ‘as usual these days,’ not that simple.” Last year was a record year for new orders of reefers, the report said. And since they’re relatively quick to make, there should be plenty to go around. “In a normal shipping world, everything would be sailing smooth, but with all the disruption we face, even all the new builds cannot cover for congestion, increased lead time, trucker and genset shortage – just to name a few disruptions,” the report noted.
The market rates varied from place to place. For North American exports to Europe and South America, for example, rates remained stable.
But for North America to Asia Pacific from U.S. West Coast ports, rates increased two-fold over the previous quarter. That was to cover the cost of empty reefers from Asia.
Nevertheless, the report’s tone was less dire than DHL Global Forwarding’s January-February 2022 reefer market update that referred to “tough times” for many reefer shippers and importers. Not only was the world lacking reefer equipment, but dry container rates were exceeding rates for reefers, causing shipping lines to bump reefers in favour of dry containers. As a result, reefers were being stuck in Asia for six months even though refrigerated cargo was ready to ship, that update said.
Meanwhile 40-foot reefer rates increased year-over-year in the third quarter of 2021 by about 50 per cent to around US$4,700, according to a Drewry Maritime Research graph in the January-February 2022 DHL update. “So how can Chinese ginger be sold in Europe if transportation costs are same as the product selling price? It’s a bizarre situation!” that update said. “We will see this continuing in 2022 and potentially in 2023; i.e. fewer products in the supermarkets and mainly larger shippers with strong financial background being able to ship! Freezing Times ahead.”
Sure enough, in the first quarter of 2022, the reefer index reached around US$5,800. “We all are looking forward not to a new normal, but
to our ‘normal’ back in the days,” the most recent update said. For Containers Unlimited — which deals with businesses in such locales as the Netherlands, South Korea, China, and the U.S. — “the last couple of years has been pretty bad with the pandemic,” Mr. Brown said. We’ve
seen in some cases prices jumped up over 100 per cent,” he added. “We’re starting to see them come down a little bit, but I don’t think we’ll ever be back to where we were three years ago.”
Containers are challenging to find, whether new or used he said. “Twenty- foot units are difficult to come by certainly in Eastern Canada,” he said. “North America has taken a bit of a hit with availability of cargo containers of any kind of size and shape, whether refrigerated or not.”
Congestion at ports has had impacts on the availability of equipment, including refrigerated shipping containers, said Brian Dove, Marketing Manager for VersaCold Logistics Services, Canada’s largest refrigerated warehousing company. That equipment shortage in turn affects the “timing of deliveries, scheduling and re-filling of containers,” Mr. Dove said. In addition to impeding the flow of goods, the lack of equipment “impacts the availability of ingredients and packaging materials for our domestic manufacturing partners, but also the ability to get finished product to other markets,” Mr. Dove added. “Overall, it creates imbalances and bottlenecks throughout the supply chain.”
VersaCold’s size, scale and service comes into play to address those impacts because it operates in multiple sites, such as Vancouver, Calgary, Edmonton and Winnipeg. “If there’s a container shortage in one city, we can potentially transport customer product to a warehouse in another city where it can be prepared for international shipment,” Mr. Dove said. “And because we operate an asset-based transportation network, we have the equipment to coordinate the movement of those goods all with the simplicity and peace of mind of one service provider.”
Mr. Dove wasn’t able to comment on the impact of surcharges on refrigerated containers, such as those imposed at Chinese ports, however. “Our customers handle their own freight costs with the relevant vendors,” he pointed out.
EMPHASIS ON CLEAN
Dr. Michael Haughton, a professor of supply chain management at Wilfrid Laurier University in Ontario, said the problem of container shortages predated the pandemic but that the latter has intensified it. “There’s a strong emphasis on making sure that whatever comes in is clean,” Dr. Haughton said. “So for example, when containers with agricultural products are sent to Asia, they seem to, since the pandemic, go through a more rigorous inspection process.” He attributed that to the preoccupation with decontamination earlier in the pandemic, when there was much uncertainty surrounding how the disease was transmitted, although it’s not clear if that still contributes to the shortage. “I think one of the things that we can say about this is that no one knows when exactly it will end because it is not simply a matter of waiting around, as if you’re waiting around for summer to come,” Dr. Haughton said.
Typically, the transportation industry deals with shortages by creating more of what’s lacking — although in this case, that might not be so straightforward. “Certainly some of those processes in the context to which we export agricultural products, if some of those processes can be can be done faster, then that certainly will help,” he said. Another possibility might be converting standard containers into reefers. However, he concedes that might be more complicated than simply installing a compressor and refrigeration equipment.
Yet another possibility is for producers to shift to domestic markets, although he doesn’t expect that would happen overnight. “While I don’t propose that as a definitive answer, I think it’s something worth looking at. And it is something that I’d be watching for over the next little while to see if that is among the suite of solutions that organizations are willing to try,” Dr. Haughton said.