[021016.EN.BIZ] Bigger Reefer Risks Must Be Weighed Before Acceptance, Say Experts

RISK is inherent in today's global cold chains with more temperature-controlled products transiting the world than ever before.

One big problem is the carrier's ability to cope with shippers' specific needs for exceptional level of care, reporting and tracking of transshipments, says Drewry's top analyst Neil Dekker.

Although Mr Dekker credits Maersk Line's new remote container management system, it only helps visibility and analytics, but there is more work to be done.

For instance, when it comes to handling claims, "many shippers impress that carriers are generally poor at handling them," Mr Dekker said. Shippers are left with having to deal with the expense and time of managing claims.

Schedule changes and missed sailings also hit reefer shippers disproportionately hard, he said. In some instances, shippers must use air freight as an alternative.

Vessel-sharing agreements and alliances can also amplify risk for reefer shippers. "The changing alliance structure and the fact there are now fewer global carriers - the merger/acquisition of the two Chinese lines into one, APL and UASC - mean that shippers have to be more careful about how they plan and agree on their contracts.

"With more carriers slot-swapping on single services, it also means shippers need to be more careful about whom they choose to partner with," Mr Dekker said.

Jim Blaeser, vice president at New York-based consulting firm AlixPartners, said, "Shippers always need to be concerned about - and prepared for - major disruptions in their cold chains, like the port labour stoppages and carrier bankruptcies we've seen recently.

"But the day-to-day challenges posed by deteriorating carrier service levels are equally troublesome, and in some cases harder to overcome. Carriers have been scrambling to cut costs wherever possible to stay solvent, and shippers ultimately feel those impacts in their supply chains nearly every day. Plus, the stakes are even higher for reefer shippers, due to the perishable nature of their cargo, which also tends to be higher in value," said Mr Blaeser.

Marcel van Dijk, manager of cargo marketing at the Port of Los Angeles, said carriers are battling the effects of historically low rates and the impact on their business.

"Reefer business has always been the money maker for the container business," he said. Not only do carriers charge a premium on reefers, but they also are gaining market share at the expense of conventional reefer carriers.

Then again, "If you don't make money on your dry boxes", as has been the case for carriers the last five years, "you start to slow down investments, except for building larger ships," he said.

Furthermore, maintaining the quality of the reefer equipment is generating some concern, "but demand on the part of shippers to provide top quality product to their overseas customers will help keep reefer rates at a healthy level for the container lines," said Mr van Dijk.

Executives at the Port Authority of New York and New Jersey understand the myriad risks associated with handling reefer cargo, and they are positioning the port and its logistics partners to help support new and evolving demands, from responding to the impact of the Food Safety Modernisation Act to preparing for growing volumes of reefer cargo.

"Refrigerated cargo is an important market for the port," said Sharon McStine, manager of industry and government relations. The Port of New York and New Jersey has nearly 5,000 reefer plugs now, among the largest capacity on the US east coast, she said.

Marine terminal operators are expanding reefer capabilities while cold storage capacity in the region is also growing, Ms McStine said.

From the carriers' perspective, the marine terminal operators and the port authority, "reefer cargo is precious cargo, and it's treated accordingly by everyone," said Robert LaMura, New York port authority manager of maritime industry relations.

For example, the port authority's marine terminal operators have stringent monitoring processes for reefer cargo, he said, which really sets the port apart in its dedication to this type of cargo.

Source : HKSG.