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Long shipping routes, high costs

Photo of a man in front of a screen, a truck in the background.

Bruce Marshall, Global Head Refrigerated Cargo at Maersk.

Everyone was longing for a breather, and the signs were actually good. As far as the logistics industry is concerned, 2023 will be a comparatively uneventful year“, predicted Philip Gray, a refrigerated shipping expert with the consultancy Drewry, who was full of optimism exactly one year ago at FRUIT LOGISTICA 2023. “Ah well…“, he says today. “In the first three months nothing much happened and then…“ there was a spate of unexpected events. Not enough water in the Panama Canal, the attack on Israel by Hamas, rising tensions in the Middle East, attacks on shipping in the Red Sea.

Following the pandemic and Russia’s invasion of Ukraine, the pressure on the logistics industry has continued to grow, and the fresh produce business with its perishable goods is particularly hard-hit. That is reflected in the statistics which Gray presented onstage at the LOGISTICS HUB on Wednesday. Overall, refrigerated shipping declined by 0.5 per cent per ship last year. This year, “with a bit of luck”, the figures could rise again by 1.7 per cent.

The Panama Canal – a bottleneck

The crises that unfolded in 2023 remain in 2024. The decline in shipping in the Panama Canal is a daily problem especially for exporters from South America, in Chile, Ecuador and Peru for example, says Gray. The route between Central America/the Caribbean and North America has become the most important one for refrigerated shipping worldwide, supplanting the route between North America and Asia. The route between the west coast of South America and Europe has become the third most important refrigerated shipping lane, with an estimated volume of 5.95 million tonnes last year – 71 per cent of the cargo was bananas.

This year, the El Niño weather phenomenon was likely to add to the problems. All this meant longer shipping routes and higher costs for refrigerated shipping, as well as uncertainties, for example when making containers available, said Gray. For that reason, the important thing for shipping companies and customers right now was to communicate closely with each other.

Gaps in the transport network

Bruce Marshall, global head of Refrigerated Cargo at Maersk, is of the same opinion. Speaking at the panel discussion entitled ’How can the perishable goods business expand in 2024?’, Marshall said that in the current situation there were two crucial issues: long shipping routes and the shelf life of fresh produce. Shipping goods from America to the Middle East across the Red Sea used to take 30 to 35 days depending on one’s destination port. Currently, with a detour around the Cape of Good Hope, it took 45 to 50 days, he said. That automatically meant increased costs, due to higher fuel prices and in part also because ships had to increase their speed, resulting in larger payments to the EU for higher emissions. What was more, there were not enough ships to plug the gaps in the shipping network caused by longer routes.

Tracking tools and flexible solutions

That is why Maersk is in close contact with its customers for refrigerated goods. With the help of a tracking tool, Maersk can track containers in real time and discuss with the customer what to do if goods are in transit for too long: should the shipment be speeded up? Or should the goods be unloaded and sold on a different market? The important thing was to find a solution together, he said.

Costs were also an issue, he said, with Maersk pursuing ambitious sustainability targets. The goal was for 25 per cent of its cargo ships to run on efuels by 2030, and for shipments to be net zero by 2040. That was why the shipping company had unveiled the first cargo ship worldwide to be run on bioethanol. “We want to ramp up demand for eMethanol“, said Marshall. Maersk and many other shipping companies were convinced that green technologies were the right approach to fighting climate change, he said. The object now was to make customers understand that this entails costs.