Reefer Madness

The boom in refrigerated cargo is benefiting U.S. ports

Reefer Ship

By Tom Peters 2015-01-15 16:19:28

***From Nov-Dec 2014 Edition of The Maritime Executive magazine***
 
The marine industry is hardly giving the cold shoulder to temperature-controlled cargo. On the contrary, it’s extending a warm embrace as the reefer trade is growing fast and attracting a lot attention, especially in a number of U.S. ports.
 
London-based Drewry Shipping Consultants said in its latest annual report on reefer cargo that “Reefer container volumes are forecast to rise by 20.5 million tons” over the next five years from a base of 90 million in 2013. Drewry also states that, over the last 10 years, “Worldwide seaborne perishable trade rose at an annual rate of 3.2 percent… Sectors driving this growth have been meat and exotic fruit with the latter rising as much as 9.3 percent each year.”
 
However, it has not been all roses. According to Drewry, there have been some casualties among the specialized reefer fleet (refrigerated vessels with bulk or palletized cargo), which is declining as shippers more and more prefer the convenience of temperature-controlled containers. 
 
“Reefer capacity on the containership fleet is expected to increase by 22 percent over the next five years at the expense of the specialized reefer fleet,” states Drewry.
“Reefer box capacity is expected to increase by 300,000 40-foot slots to 1.9 million by 2018, and overall seaborne perishable reefer trade will increase 17 percent between 2013 and 2018, providing an additional 16.5 million tons of cargo,” Drewry predicts.
 
Bucking the Trend
 
Although the industry in general appears headed down the container route, PortManatee, at the entrance to Tampa Bay on Florida’s West Coast, is bucking the trend. Approximately 80 percent of the port’s reefer business arrives by reefer ships, says Executive Director Carlos Buqueras. “As far as breakbulk fruits and vegetables are concerned, we are the largest in Florida,” he notes. 
 
Buqueras acknowledged that his port is going against the grain, “but I think that depends on the customer and depends on the shipper. In this case, Dole and Fresh Quest are doing it all palletized.” Dole and Fresh Quest, major customers of the port, bring in a lot of product from Central America. Manatee will handle 100,102 tons of perishable goods in 2014, an increase of 59 percent over 2013, including 44 million pineapples and about 100 million bananas. The market for these products is “at our door step,” notes Buqueras, with eight million local consumers and 50 million tourists annually moving through the region.
 
Container Surge
 
In nearby Port Tampa Bay, Florida’s largest cargo port by tonnage, Wade Elliott, Vice President of Marketing and Business Development, said the port is making major investments to grow its reefer business, particularly on the container side. Tampa sees its reefer future in containers and not reefer ships.
 
“No question. When you look at where the carriers are these days, the writing seems to be on the wall,” he says. “This is the future of the industry.” But breakbulk reefer is not foreign to Tampa. Approximately five years ago the port made the “strategic decision” to move away from that mode, explains Elliott: “We are expanding our container terminal and gantry crane rails to be in a position for growth in containers.” 
 
With that goal in mind, the port and its terminal operator, Ports America, plan to invest $24 million in two new post-Panamax gantry cranes. The port also plans to expand storage capacity to accommodate its growing reefer business and is working with CSX on a new rail connection to the Midwest.
 
“That will provide express rail service between Tampa and the Chicago and Midwest markets,” Elliott commented. “The cargo would fast track on a 56-hour express service to the Midwest. You would actually shave three to four days off the current routing where a lot of that business goes from Philadelphia and is trucked to Chicago. So you would have savings in transit times and savings in cost. The service would also accommodate exports with produce and other types of reefer goods coming out of the Midwest destined for export, say to Latin America.”
 
Port Canaveral on Florida’s East Coast has provided refrigerated cargo service for many years, mainly on the breakbulk side. In the port’s last fiscal year, Ambassador Services moved 50,000 short tons of breakbulk reefer cargo and 208 TEUs. Products include juice and grapefruit to Europe and Japan. There has also been produce coming in from Guatemala and Ecuador.
 
Alberto Cabrera, Senior Director of Cargo Business Development, said Canaveral is looking to boost its reefer business, particularly in containers. Canaveral has not really been in the container business, but it does have some 300,000 square feet of refrigerated warehousing, 84 electrical plugs and is presently doing preliminary work so more plugs can be installed when needed. “We are still in the infancy stage,” said Cabrera, but he is convinced reefer cargo “will be a big play for us” since the port is close to the major consumer markets in Central Florida.
 
Private Enterprise
 
The Port of Houston is taking a hard look at reefer cargo but prefers a private sector approach to growing the business. In 2013 the port handled 76,975 refrigerated TEUs and, through August of this year, has handled 53,036 TEUs.
 
Stan Swigart, the port’s Market Development Manager, says reefer cargo is “a small piece of our overall container business, but we are trying to grow it. Currently we have private facilities that are basically hard-freeze, cold-storage facilities. We do a lot of hard-freeze products such as frozen meats and chicken in containers because we have facilities that specialize in that. We have plenty of reefer plugs and equipment, so it is just the chilled (cargo) we are trying to break into.” 
 
Swigart said the port has taken the position that it wants to attract private sector infrastructure and only containers. “We don’t get reefer ships anymore,” he said.
The port has launched an RFP “to put in a facility close to Bayport, our newer container terminal. That would allow us to attract more chilled vegetables and fruit, that sort of thing, from South America.” The reasons for the private investment push include “the expertise required and the cost – a fumigation shed, transload facility, and so on. It would be a complete facility build-up, but we have the property.”  
 
He added that the reefer sector is expanding “primarily because we are so close to major consumption. The Houston area is growing because of the petrochemical industry, and that growth is attracting new people into the area because there are jobs.”
 
In nearby Galveston, the refrigerated cargo business consists mainly of one terminal operator, Del Monte Fresh Produce, which imports chiefly fruit, said Port Director Michael Mierzwa. The port for many years handled breakbulk produce on pallets, but more of that product is now coming in containers. However, Del Monte has a ship that arrives weekly that has reefer containers but also bananas on pallets. 
 
Mierzwa said the transition to containers came about mainly due to the improvements made at the Del Monte terminal. In 2010 the company invested about $10 million to improve refrigeration and upgrade its operation. The port also invested about $10 million by widening the terminal apron to 85 feet. The local labor force, Gulf Stevedoring, invested $3 million in a new crane, which has doubled the number of container moves per hour to about 25.
 
Container traffic has increased tremendously at the terminal because of the improvements. In 2013 the port handled 190,670 short tons, mostly bananas, of containerized reefer cargo. “I expect this year the numbers will be higher,” said Mierzwa. “Already through September we have handled 157,759 short tons in containerized reefer, roughly 18 percent ahead of where we were last year.” Through September the port handled 222,000 short tons on pallets, a 15 percent increase over 2013.
 
Mierzwa added that pallet tonnages are still greater than containers, but the container side continues to grow. The port will add 190 reefer plugs by the end of the year to accommodate the growth.
 
West Coast
 
On the West Coast, the Port of Long Beach is building infrastructure to support its reefer business. Marketing Manager Ken Uriu said the port’s mid-harbor project, which is consolidating two old terminals into one modern facility, will include a number of reefer racks. The racks and additional plugs are all part of the port’s 10-year plan to invest $4.5 billion in upgrades.  
 
Last year reefer cargo accounted for just 1.9 percent (1.2 million metric tons) of all port cargo, and 99 percent of it was moved in containers. The largest portion of imports was seafood coming from various regions of Asia while exports, which make up 68 percent of the port’s reefer trade, are largely citrus fruit heading back to Asia. – MarEx 
 
Tom Peters is based in Halifax, Nova Scotia.
 
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