By Keith Norbury

“An odd year” and “up and down” are two descriptions of the 2011 refrigerated cargo market in Canada. It has also been described as a “growing” and “profitable business,” say those in the industry.

“It started fast, then slowed through the middle, then orders increased towards the end once again,” said Jeff Zanini, National Manager of Product Development, Kuehne + Nagel Canada, a wholly-owned subsidiary of Kuehne + Nagel, based in Bremen, Germany, and which has more than 1,000 offices in more than 100 countries. Mr. Zanini, who called 2011 “an odd year” for refrigerated cargo, added, “There seemed to be some caution, but at the same time the order books were filling up. We still saw organic growth overall through our vast portfolio of commodities.”

One challenge that persisted in 2011 was Russian authorities removing certain Canadian pork production and processing plants as eligible to export to the Russian Federation, resulting from misunderstandings as to whether Russian processing and inspection standards were being adhered to or not. “More plants were relisted towards the end of 2011 and we can already see the difference in shipping patterns in Q1 2012,” said Mr. Zanini.

Meanwhile, business in Japan, which had suffered in the aftermath of the devastating tsunami in March, began to recover in the second half as consumer confidence was being  restored, Mr. Zanini said.

Dan Gleeson, President of Associated Cargo Specialists Canada Inc., said the reefer market has been “up on some, down on others.” Lately, it has been soft, “but overall we’ll probably do the same as we did last year. I’m hoping so anyway,” Mr. Gleeson said.

When the company, which is based in Montreal but handles cargo all over Canada, began a quarter century ago, it shipped hundreds of refrigerated containers a year. Now those numbers are in the thousands, Mr. Gleeson said.

“Last year, 2011, we had I would say 5,000 TEUs, easily,” said Mr. Gleeson, whose company specializes in refrigerated cargo, which accounts for about half of its business.

Overall, activity in the first quarter of 2012 has been on the rise for imports and exports of reefer products, Mr. Zanini said. “There seems to be an increase of orders from overseas clients for both seafood and meat products.”

During the economic downturn, as ocean carriers struggled for profitability, it put pressure on freight forwarders to ensure prompt pricing and smooth bookings, Mr. Zanini noted. In the end, though, the forwarding community weathered that storm, he said. “Similar to last year, the forwarding community is still forced to do more work as the carriers have become overly processed and streamlined while they try to return to profitability,” Mr. Zanini said.

Dr. Barry Prentice, a professor in the Supply Chain Management Department of the Asper School of Business at the University of Manitoba, said there is not much new in the temperature-controlled trade except that “the volume continues to grow.”

“We are certainly living in an era where almost all value-added food products have to go via refrigerated or temperature-controlled equipment because that’s the nature of the beast,” Dr. Prentice said.

The biggest potential market for refrigerated cargo is Asia, he said. “Because they’ve got the people.”

However, Darryl Anderson, a Victoria, B.C. transportation consultant, said China is such a big player in the commodity market that it can buy and swing capacity. “And that’s a little harder for a shipping line to adjust to when you actually have to have a balance in your supply chain,” said Anderson, who is the Managing Director of Victoria, B.C.-based Wave Point Consulting.

For that reason, he said, Canadian frozen producers tend to focus on the North American market. “They’ve got a few offshore speciality markets like Japan,” he said. “Korea kind of is in the same boat. And then there’s the rest of the world that they engage in specific trades on more of a commodity basis.”

Dr. Prentice also predicted that Mexico will be a long-term market for  Canadian chilled and frozen products, such as pork because the country lacks grain to feed its own hogs, and the cost of grain is also rising.

“The question always has been: with rising incomes will people consume more meat? And we’ve noticed that almost everywhere in the world that does happen,” Dr. Prentice said.

Ruth Snowden, Executive Director of Canadian International Freight Forwarders Association (CIFFA), expressed confidence that the reefer business is growing. “And what makes me think that is CN has just appointed a specific individual to deal with its reefer business.”

That individual is Girish Nair, who will be launching “a new dialogue with the import/export community to better understand the factors that drive the cold supply chain and logistics,” said an item in a recent CIFFA newsletter.

CN is also investing in its fleet of electrical generators – or gensets – by adding more fuel-efficient units. And the company is planning to introduce a reefer service this year between Canadian ports and U.S. cities, starting with Chicago, said Jean Jacques Ruest, CN’s Executive Vice-President and Chief Marketing Officer.

“Right now, Canadian railroads do not serve U.S. cities from Canadian ports for reefer business,” he said.

CN does, however, carry dry freight into its terminals in Chicago and Detroit, where CN’s truckload service does local deliveries.

“Let’s say in the Greater Chicago area, they buy product that needs to come to them in reefer service from Asia,” Ruest explained. “That vessel call could be Prince Rupert or Vancouver. They get on a train to Chicago, then we do the local delivery.”

The empty container needs to return to the coast. So, CN would find an export load of product from the U.S. Midwest, such as apples or beef, and put it on a train back to the Pacific coast. Or CN could take the container empty to Winnipeg and load it with pork to take to the coast.

“This is like trucking: you have a head haul and then you look for a back haul from the same city,” Mr. Ruest said.

CN is confident it can tap into markets that already exist in Chicago and other heavily populated areas in the U.S. Midwest.

“Obviously this trade exists,” Mr. Ruest said. “We are not creating new trade.”

CN has also increased its genset fleet, used only for importing and exporting refrigerated cargo, “by about 15 to 20 per cent,” Mr. Ruest said.

CN, which in 2010 invested $500,000 to double the capacity of its import/export reefer facility in Vancouver, is going to lease the new gensets at first, Ruest said, but will purchase them once a trial period is over.

The new genset units can each power up to 16 containers at a time. However, one needs a minimum of seven or eight to be connected to each  genset to be fuel efficient. “If you have more than 16 containers, you’re going to leave some behind,” Mr. Ruest said. To address that problem and complement the gensets, CN is looking at acquiring portable “clip-on” gensets that can be attached to a single container, similar to the generating unit on a truck.

“We’re looking at this as finding ways to provide and offer a more appealing service, a service that addresses more the need of the customers, whether import, export or domestic,” Mr. Ruest said.