Reefer exports kick-start expected upturn

As reefer exports gain momentum and the automotive industry shows signs of recovery, DAL Agency managing director Ron Frick is quietly optimistic about the future. DAL Agency, although established in July 2008, took over the sales and marketing responsibility of DAL’s Europe service from Safmarine effective on November 1 last year. And by Frick’s own admission, the timing was as imperfect as it gets. “In my 38 years in the shipping industry I don’t remember a period where freight rates were at such depressed levels,” he told FTW. However, there are signs of change, with shipping lines on the Europe route having implemented a $200 per TEU general rates increase north and southbound. “In the SA-Europe Container Service the Saecs member lines have, due to seasonality, temporarily suspended the intermediate service to reduce available capacity to more appropriate levels. “The withdrawal of capacity for a four month period has resulted in the core service taking over the cargo the intermediate was carrying, and that service is now running full in both directions. This reduction in capacity creates an environment conducive to restoring ocean freight rate levels back to where they were in the first quarter of 2009,” said Frick. “Europe-SA has always been a very stable freight market because of the relatively limited container volumes shipped between Europe and South African and vice-versa. In the good years container volumes grew at 1-2%. However, in the past 18 months the business has shrunk in real terms by 15-20%.” Volumes have however started picking up since July, particularly southbound, according to Frick. “It’s nothing dramatic but we have hopefully reached the bottom of the curve and the only way now is up.” Northbound volumes have been fairly static with strong demand for 20 ft heavy containers posing a challenge for every shipping line. “The modern vessels’ design is more 40 foot friendly in terms of container slots, so if you carry 20 foot boxes you sacrifice some container space,” he explained. “The average ship’s design is around 14 tons per slot and a lot of SA export cargo is heavy – the likes of canned goods, wine, wool and minerals and copper – so you tend to hit vessel weight limits before you hit container utilisation.” But this is a seasonal trend and in the reefer season, reefer cargo will get priority due to its perishable nature. “For us, reefer cargo is largely behind much of the positive sentiment. “We anticipate the reefer season in 2009/2010 will be much better for exporters than 2008/2009. Apart from the limited buying power in overseas markets as a result of the recession, there was carryover of deciduous fruits held in cold stores in Europe which suppressed the normal demand from Southern Africa. As a result a lot of SA fruit was channelled to the Middle East instead of Europe due to better prices being achieved,” he said. Frick is also mildly confident about the automotive industry. “It’s always a barometer of the SA economy and if you look at the National Association of Automobile Manufacturers of SA figures on the sale of new vehicles, the comparative year-on-year decline is easing off. So in real terms we have probably seen a moderate growth, albeit from a very low base, and we are hopeful that this trend will continue. DAL Agency is in a strong position to take advantage of the expected upturn, says Frick, with its national and regional network now firmly established.