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Threats to reefer cargo are threats to all cargo using Red Sea-Suez and Panama canals

Reefer cargo is the most affected by any interruption in access to the world's two major canals - the Suez and the Panama.

And Thomas Eskesen, former head of Maersk reefer shipping, and founder of Eskesen Advisory, is greatly concerned that this international vulnerability is not as appreciated as it should be throughout the non-reefer sector.

As for Suez Canal disruption, Mr Eskesen says, "this will have massive implications for the global cold chain industry. And much more than that which meets the eye."

While it is not a major reefer corridor, Suez is mainly a protein link to and from Europe and Asia, but there are also major connecting points towards Africa and the Middle East.

"We see cargo now being stuck on either side of the canal, so for example if you are a fruit shipper from Egypt or Morocco and you have customers in China, you can’t get your product through. A lot of these are time sensitive cargoes with a defined shelf life. So you can see the implications of delays and unpredictable arrivals," he said.

Another problem facing the reefer sector on either side of the Panama Canal is the weather. The number one problem by far is El Nino. The El Nino effect is impacting the seafood catch off of the west coast of Latin America, it’s impacting banana production on either side of the Panama Canal, Mr Eskesen said.

"We think the market has moved in 2023. There were shortages of fruit because of lack of profitability, the farmers were not making money in 2023, now we think it has moved to be a sellers’ market if they have the product.

"If they have not had weather implications to their harvest, they are actually in a very good spot in terms of selling to retail. So we should see pretty healthy profits again on the fruit grower side, but also watch out for shortages of fish and other things.

"We don’t see any demand problems in terms of consumer behavior in the northern hemisphere, which is still pretty good. It might only be the Chinese consumer that shows a little restraint but otherwise we see that demand is still good.

"But it’s the weather that is by far the biggest challenge for us in 2024. And that means retailers need to be very careful in terms of how tough they are on their suppliers. Rather they should be sure they lock in suppliers versus trying to beat them up," he said.

Returning to the difficulties of the Suez Canal, Mr Eskesen said: "It’s a pretty massive event, probably the event the shipping lines were fearing, of course for crew safety, but of course we can also see the stock market reaction which has been very positive, with Maersk shares up over 25 per cent since this has happened. So bottlenecks are good for shipping lines, it ties up capacity of ships and equipment but for mankind it has already done enough damage, so we should all be concerned."

Yet Mr Eskesen is encouraged by the concern of the shipping community by this first real attempt to create a cold chain conference on the back of the bigger TPM.

"So we think we have the unique opportunity and value proposition that you get to listen to big industry players from the shipping industry, railroads, ports etc, and then following that we deep dive with the sector leaders from the cold chain whether it’s Lineage, Americold, the bigger shipping lines like Maersk, Cosco and Hapag-Lloyd. There has been very strong buy in from the shipper and BCO community. We have set up eight unique debates and we could have probably done 10-12 based on the interest, so there are very positive signs.

As Mr Eskesen sees it, this could pave the way for a whole other set things the reefer sector can address such as food waste and other temperature regimes that requires a more comprehensive approach.

"For example it’s not enough that a meat producer is in agreement to change the temperature point, you also need the shipping lines, and the cold storage providers and the truckers and the retailers to adjust the temperature throughout the cold chain.

"These are still early days but it shows that the businesses are beginning to take this seriously. This is not driven by politics, it’s not driven by the UN or governments, it’s actually driven by businesses, because it’s good business for them and it’s common sense for them to work together as a coalition.

"I am much more optimistic than I would have been a year ago. We have moved away from the greenwashing to much more substantive work and collaboration, so it’s very encouraging," Mr Eskesen said.

Because reefer cargo is so needy, it must be subject to artificial and sustainable conditions over long periods and throughout different modes of transport. Not to mention during those awkward stages on its journey while enduring intermodal transfers.

In short, if 99 per cent of the journey is maintained at the highest standard, it just takes a singular moment, one per cent of substandard treatment, a broiling afternoon in the sun on a forgotten stretch of airport tarmac or a frigid night on a railway siding - and all is lost.

What the non-reefer community in the shipping world must appreciate is that perishables are not merely perishable, needing tender loving care throughout, they are also greatly preferred by the most affluent of consumers.

In any economic downturn, whose coming is as predictable as rain, affluent consumers are the least vulnerable and the best protected of customers. That's why ecommerce is recession-proof, or very nearly so.

Thus failure to handle a type of cargo of which they represent the bulk of its consumers is an intolerable state of affairs that is bound to spread to non-reefer segments of the supply chain worldwide.

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Because reefer cargo is delicate and expensive, it is favoured by affluent consumers, who also consume disproportionate volumes of all cargo dependent on the Suez and Panama canals. Should we not prioritise these difficulties and resolve threats to these waterways?

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Mediterranean & Africa
Trade Specialists