Conventional reefer markets have entered peak season with freight and time-charter rates continuing to climb.
There is little sign that freight levels will drop back in the near-to-medium term as capacity shortfalls are far from being solved, brokers believe.
Spot freight rates and time-charter earnings for conventional reefer vessels virtually doubled to reach their highest level for several years by the end of 2021.
That is continuing this year with the ISB Seafield Reefer Index climbing further in January and breaching the 2,000 barrier.
The index — which measures time-charter earnings and spot freight rates for key fish and banana trades — ended 2021 up 105% to 1,841 points.
That was the highest it had been for six-and-a-half years.
The rises reflect markets which are unlikely to fall any time soon, according to Glenn Murphy, chief executive of Irish Shipbrokers and its reefer division Seafield.
“We’re into peak season now, so chances of the market going south in the next three-to-nine months is unlikely,” the Dublin-based shipbroker said.
“It may start to level out as the key trades are probably covered on time-charters for seasonal contracts.”
“But the shortage of capacity hasn’t abated anywhere,” he added.
Short supply
Reefer markets rose in January when tonnage was in short supply ahead of the squid and Chilean fruit seasons.
That has pushed February rates for smaller reefer vessels to record levels.
Rates for the small handysize reefer segment of 100,000 cbf to 350,000 cbf rose 62.8% year on year at the end of 2021, according to Seafield assessments.
Demand from meat exporters in South America helped push up rates to $1 per cubic foot per month.
The market for larger reefers was characterised by a lack of reefer capacity in South and Central America, South Africa and New Zealand.
Improving squid catches in the southwest Atlantic — a bellwether for the larger reefer sector — sucked up capacity and provided a base for freight rates for the remainder of the year.
Larger reefer vessels over 350,000 cbf mainly trade in the fruit and banana trades.
These vessels saw time-charter earnings rise 110% during the year to almost $0.9 per cubic foot per month.
The lack of fleet capacity suggests that fleet utilisation will remain at close to 100% this year, Seafield believes.
Rates have also increased as a result of longer voyages and increased tonne miles per vessel.
These have been pushed higher by demand for reefer cargoes that would once have been shipped in containers.
Modal shift
Murphy said that reefer vessels that might once have ballasted back from the Pacific to the Atlantic for 30 days are instead being loaded full of cargoes.
And demand for conventional reefer capacity has soared due to the spillover of cargoes from other markets.
Faced with rising costs and lack of equipment, many cargoes that may have been shipped in reefer containers or as breakbulk cargoes on bulkers are reverting to conventional reefers.
“There is volume movement in reefers that might have otherwise gone in containers,” said Murphy.
“Reefer has a multifaceted capacity — it can serve a number of markets. That’s what is keeping the pressure on it,” he said.
The ISB Seafield Reefer Index measures charter rates for vessels of between 260,000 cbf and 470,000 cbf and spot freight rates on fish and fruit trades in North Africa and South America to Europe.
Despite the booming freight market, the conventional reefer fleet contracted as owners of 1970s and 1980s-built handysize tonnage took advantage of rising demolition prices and scrapped vessels.
That resulted in a net reduction of reefer capacity of 2.95m cbf, a drop of 1.6%.
Total fleet capacity is estimated at 576 vessels over 100,000 cbf. These vessels have a total of 185.7m cbf and an average age of 28.5 years.
Remaining relevant
Murphy took over in November as international chair of the London-based Institute of Chartered Shipbrokers (ICS).
In that role, he remains keen to ensure that the ICS remains a relevant and progressive professional body in shipping.
He believes that can be ensured by rebuilding the relationship between ICS and the big shipbroking houses.
The provision by the institute of trained and qualified professionals gives the shipbroking segment a professional distinction that may be lacking in other sectors, he argues.
