Refrigerated containers

Refrigerated containers like these at the Port of Portland have taken a back seat to dry containers, which are more profitable for shipping companies.

Growth in the global trade of perishable foods is averaging about 4% per year, but supply-chain problems in 2021 have made a challenging business sector even more difficult.

“The ability to get this cargo to its right place, especially during seasonalities, has been a major challenge, and it will continue as we go into 2022,” said Bill Duggan, North American cold chain adviser for Eskeson Advisory.

What happened in 2021 has been a sad story, especially in the refrigerated stage, he said during an “HIS Markit” webinar this week.

Shipping rates in the dry market in particular have tripled and quadrupled, and refrigerated containers have taken a back seat. The dry market has become much more profitable than the refrigerated sector, he said.

“That means the refer container gets second priority, and dry cargo will continue to be stuffed into refer containers by carrier, whichever carrier feels that that is more appropriate to do,” he said.

There’s been extremely poor service, with ships sitting in ports all around the world, and what happens to the perishable cargo is just a disaster, he said.

“We’ve had unprecedented congestion both on land and sea,” he said.

Trucks are a problem now, with restrictions on owner-operators in certain places — California in particular. And there’s a trucker shortage of about 85,000 drivers in the U.S., he said.

“So we have a real problem on our hands. We have warehouses that are at capacity,” he said.

Containers are being stacked at facilities on the chassis, which is reducing equipment turn times significantly, and there’s also issues with labor, he said.

“This is almost a perfect storm that we’re seeing right now,” he said.

More than 200,000 refrigerated containers have been added, but that still isn’t enough, he said.

“That’s not enough to keep up with the organic growth, let alone the broken supply chain,” he said.

On top of that, costs are rising for materials, packaging, fertilizer and fuel, he said.

“It’s across the spectrum of everything in the supply chain, so it’s been a disastrous year when it comes to service/delivery on the land and sea,” he said.

Importers and exporters can expect to pay significantly more on the refrigerated side, as that business is now following the pattern that developed in the dry business. Shipping lines will continue to prioritize vessels and equipment in profitable markets, he said.

“Service levels will not improve anytime soon, as supply chain on the dry is broken. It’s a sad state of affairs that we’re in today,” he said.

All across the supply chain, the story is not good, he said.

“It is unfortunately right now a seller’s market, not a buyer’s market,” he said.

Importers and exporters are going to have to make the best deals they can for 2022, he said.

“We don’t think this will subside anytime soon,” he said.

All indications are that it’ll probably be the third or fourth quarter of 2022 before there’s any relief, he said.

Sign up for our Top Stories newsletter

Recommended for you