The last few years have not been kind to the global reefer fleet. Demand for these niche vessels has been diluted by the advent of increased reefer ca-pacity on containerships. Further-more, the recent drop in volumes on mainlane box trades as a result of the economic downturn has forced lines to cascade larger vessels onto lower volume trades, including those north-south trades that provide a great deal of the demand for temperature-controlled shipping. The result has been an increase in the amount of refrigerated TEU capacity employed on these lanes, which has ultimately meant increased competition for the conventional reefer vessels.

Oh Baby, It’s Cold Outside…

Given this stiff competition for cargo it seems rather strange that some are expecting the reefer industry in 2010 to be characterised by undersupply. The basis for this argument is that the sector has suffered from serious un-der-investment for some years now whilst demand that did exist has been curtailed by the credit crunch. Just 35 reefers of 16.9m cu.ft have been con-tracted since 2002 and none were contracted throughout 2009. Indeed, the last reefer vessel to be ordered was in July 2008 whilst the last time contracting reached double digits in a single year was back in 1998.

Stay Frosty…

So, what does this mean for ship-building? Reefer capacity has con-tracted in every year since 1999 whilst the average age of the fleet has risen to almost 25 years (see graph). Furthermore, the reefer orderbook comprises of just 13 vessels of 8.1m cu.ft, highlighting the recent lack of enthusiasm for ordering in the sector.

In fact, the reefers on order are ac-counted for by just 4 owners, with only one having invested in any ca-pacity at all for scheduled delivery after the end of 2010. This highlights the relatively small number of poten-tial investors. Much of the market remain unconvinced about future demand, and a number of respected owning interests have chosen to exit the sector in recent years. At least two others have gone bankrupt.

Another problem might be the lack yards capable of building reefers. Just three yards currently have vessels on order, and during the last decade, just sixteen yards have built reefers. Seven of these yards are in Europe and may no longer be competitive. It seems likely that any orders would have to be placed at a Japanese yard such as Shikoku or Kitanihon, which have in the past built more reefers than any other yard still active.

Frozen Over?

So, the reefer market is never likely to be the volume trade it once was, and significant investment still looks unlikely. However, the esoteric na-ture of reefer trade remains: the ves-sels are often employed on a seasonal basis and where poor infrastructure does not permit container handling, and increases in both banana and squid cargoes from the Southern hemisphere in 2010 are expected to push up demand for specialised reefer capacity. Interest in this sector may have cooled but it might not be totally frozen over just yet.