Reefer shipping rates rise to be temporary as excess capacity plugs gaps

Trade volumes have been largely unaffected by the disruption, with volumes for the fourth quarter estimated to have risen by 3.2% YoY. Ongoing weakness in the Chinese economy contributed to weaker-than-expected demand for key protein shipments in 2023, but the trade posted a return to growth in the second half of the year, boosted by high beef exports from Brazil and Australia. The arrival of El Nino in 2023 continues to impact fruit crops around the world, as the increasing unpredictability of weather systems has dented production. For instance, trade in bananas was down by 1.3% YoY last year. However, nearly all the largest producing countries recorded stronger growth in the second half, coming from a low baseline in 2022. Trade in melons and berries was hardest hit, falling by 6.8% YoY in 2023, as poor harvests in South America drove a scarcity of quality produce.

A secondary impact of re-routing cargoes has been on the pool of reefer container equipment, as extended transits have meant that empty boxes take longer to be redistributed across the network. Despite this, Drewry expects the global pool of reefer containers to expand at just under 10% over the next five years, a downgrade on previous forecasts. This is the result of some easing in oversupply following the pandemic, coupled with better monitoring of fleets going forward which is expected to drive efficiencies and streamline operations.

Volumes on nearly all major reefer intensive trade routes fell last year as an expected uptick in cargo demand failed to materialise. Deflationary pressure in China meant that key North America to Asia and North Europe to Asia volumes slid further in the final quarter. Meanwhile, trades to and from Europe continue to evaluate the impact of ETS costs on competitivity, as the next milestone will require companies to submit allowances for 70% of verified emissions next year, rising to 100% in 2026, depending on vessel size.

Despite persistent volatility in the global economy the core nature of reefer commodities in supporting the world’s expanding population means that the sector is expected to return to growth. After declining in 2023, Drewry forecasts that seaborne reefer traffic will recover in 2024, expanding 1.7%. Modal shift to containerships is also set to continue, with containerised reefer traffic projected to deliver a CAGR of 3.1% over the next five years, which will help to support reefer freight rates over the medium term.

Reefer Shipping Forecaster

Providing concise, quarterly updates on reefer shipping trade development, vessel capacity, container equipment availability, freight rates and trade route development. The quarterly Reefer Shipping Forecaster offers a unique, regular outlook on market dynamics.

Find out more