World reefer industry ‘reasonably strong’

SPIRALLING OIL prices know no discriminatory boundaries. The impact on global shipping and other transport sectors is significant and it’s a scenario that does not augur well for the future, says Ian Fairlie, Safmarine’s reefer trade manager for sub-Saharan Africa. Indeed, he believes it is likely to become worse before it gets better as demand, driven in the main by the ‘roaring giants’ China and India, outstrips supply. “Oil prices are certainly impacting on the reefer business by increasing our cost and we see it increasing further.” ($143 a barrel at the time of this writing). Safmarine’s floating bunker adjustment factor is directly linked to the price of oil, therefore a higher oil price means an increased BAF, for which the customer is responsible. The new floating BAF calculation has been implemented on Safmarine’s North America, Middle East and Far East services so far, with other trades to be incorporated in the near future. This includes the Europe service which accounts for around 60% of the line’s reefer services out of South Africa. Fairlie says the world reefer industry is “reasonably strong”, the entire sector growing between 5% and 8% last year, while Safmarine’s global reefer growth outperformed this and is likely to see similar growth for 2008. He explains global reefer growth represents a combination of container and breakbulk volumes. Safmarine is no different in that growth stems from conversion of breakbulk into containerised cargo. The swing from conventional fruit shipping - that is largely refrigerated underdeck - to containers has been remarkable, with containerised citrus volumes out of South Africa commanding some 72% of citrus exports (Source: PPECB). Between 80% and 90% of the deciduous market has been converted from breakbulk to reefer. Nevertheless, Fairlie does not believe this points to the writing on the wall for the conventional shipping mode, which will still have a role to play, albeit diminished. South Africa is the major player in Fairlie’s portfolio, accounting for 80% of outbound reefer trade, followed by Senegal, Ghana, Ivory Coast, Kenya and Mauritius. South Africa is the dominant importing force (largely frozen beef and poultry from Brazil and Argentina), followed by Namibia (the same commodities), and Angola assuming increasing status with frozen South American meat imports and a significant trade from Europe, given Portugal’s erstwhile connection with the West African country. Of note, from Safmarine’s reefer business perspective, is that services to Europe and the Middle East have grown at the expense of North America and the Far East during the first six months of the year, driven by favourable citrus prices, particularly for lemons, in Europe.