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ONE ceo Nixon sees reefer rates rising by second half of 2019

Reefer container freight rates will go up by as soon as the second half of 2019, ONE ceo Jeremy Nixon said at the 4th Cool Logistics Asia in Hong Kong.

While noting the significant growth of the reefer and continuing good prospects, Nixon said a combination of factors will lead to an inevitable rise in rates. The global reefer market grew 8% in 2017 and in the first five months of this year is already up to 6.1% growth, and of this reefer containers comprise about 8.5m teu making up over 80% of market share, he noted.

“The demand side is looking pretty strong and quite encouraging and if you break that down into particular regions the biggest export markets continue to be Latin America,” Nixon said. Within this, the west coast has been very strong with the current fruit season to Asia and meanwhile the latter region is also rapidly developing as not only a producer but increasingly a consumer of fresh produce. “The intra-Asia trade is growing very, very rapidly as products are moved around amidst greater sophistication in the consumer market,” he said.

However on the flip side, costs are also rising. While ONE and other lines have been investing in new equipment, the reefer container business is a very capital intensive one with equipment costs several times that of normal dry freight containers, he noted. Meanwhile the lines have all been struggling with profitability over the past few years, putting constraints on finances. As a result supply side growth has been quite tight, he said.

Read More: 10 questions for Daikin Reefer president Shin Furuta

In addition, energy costs have gone up significantly in the past year. Running reefers consumes extra energy and higher fuel costs factor directly into this. Giving representative figures, Nixon showed that each reefer plug onboard costs about $74 on an average 20 day voyage and this cost goes up even more if generator set costs are factored for inland sectors. “These are not insignificant costs and unfortunately these costs are going to go up,” he said.

Looking ahead to the 2020 sulphur cap, Nixon pointed out that fuel costs will increase by at least $220 to $240 per ton and possibly even more from the current levels simply because of the need to switch to low sulphur fuels. “That will be a challenge for the industry and unfortunately it does mean we will have to push up our cost recoveries as we go into the latter end of 2019,” he concluded.

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