1.0 INTRODUCTION

1.1 Reefer Market

The reefer market is about transporting refrigerated or frozen cargo such as fruit or meat to the industrialised world. The reefer operations has had a rough time in the past 15 years, as container carriers have moved in and taken more and more of the traditional reefer cargo.

Reefer shipping started with industrialisation in the past. It was back in 1875 when in the USA commercial freezing of fish and meat commenced using salted ice and the go-ahead was given to reefer transport. Britain start to import frozen meat from the USA and in 1881 Australia shipped the first major quantity of frozen meat to Britain. With the introducing of mechanical and cooling media, along with the compressor, bring a giant step forward in the technical development of refrigerated transport. The development of reefer machinery and ventilation followed by more sophisticated cargo handling systems pushed the reefer shipping to another peak. During the late 1960s, the last banana stem was transported. As from then on bananas would be put in cardboard boxes, which were soon with other fruit to be loaded on pallets.

Shortage of nutritious food is driving the deficient regions to import goods from surplus production regions, while wasting of high value perishable goods is driving surplus regions to export goods to deficient regions. The existence of the reefer market is to balance the above needs. Reefer, also known as refrigerated shipping is on the upswing. This condition is due to the small numbers of new reefers coming into the market and the sustained rise in the movement of perishable goods.

1.2 THE DRY CARGO MARKET

The dry cargo market is the most diversified market compared to other shipping market. An average day, the commodities used and the raw materials delivered by Bulk Carriers are those ships that carry unpackaged commodities such as coal, ore or cereals. Part of the reason for their success today are because they are exposed to the resources cycle: more coal or iron ore being mined in places like Australia and demanded in places like China obviously requires more dry bulker to carry it.

The Dry bulk trades comprise iron ore, coal, grain, timber, steel and other similar cargoes which are shipped in bulk as opposed to carried in containers

or other unit loads. Dry bulk shipping refers to the movement of significant commodities carried in bulk so-called major bulks, together with ships carrying steel products (coils, plates and rods), lumber or log carriers and other commodities classified as the minor bulks.

The dry cargo market is subdivided into:

Bulker Tweendecker Container Roll On/ Roll Off(RO/RO) Liner Small ship Special

2.0 MARKET OVERVIEW

2.1 THE REEFER MARKET

Market share - Reefer Export Seaborne distance volume

Lat. America42 %

Asia16 %

W. Europe16 %

N. America13 %

Africa6 %

Med6 %

Others1 %

6.

Market share - Reefer Import Seaborne distance volume

W. Europe39 %

Asia29 %

N. America14 %

Lat. America3 %

Med5 %

Baltic9 %

Other1 %

Figure 1: Market share - Reefer import and export.

The market for transporting refrigerated cargo has actually developed well over the last decade but approximately 50% of the trade is nowadays carried in containers. Although some people in the reefer business claim that the container has stopped taking the market share, the Lloyd’s Register believe those analysts that forecast the 50% increasing to 60% within a few years’ time. From their opinion, the seller of fruit tends to belong to smaller and smaller units and not to big umbrella organisations whereas the buyers are

large supermarket chains since the competition authorities put a lid on too much cooperation. This is an advantage for container operators that already serve the supermarkets in a range of other markets. Currently, the supermarkets control the grape, pear and apples trade. However, bananas are still in the hands of the big banana companies as the key commodity. If bananas are the key commodity for the reefer market, Europe will become the key market automatically.

In the future, condition of the reefer markets are remain strong due to combination continuing of underlying demand growth for frozen product, especially in Russia and East Asia, and also static reefer fleet because of the lack of new building activity. But, the longer term trend toward the containerisation will expand itself, as new and ever larger containerships with abundant reefer container capacity are added to the containership fleet.

This segment explains about development of reefer trades by sea, identifying trends in the major importing regions and exporting countries. The commodity group analyzes the market development of conventional reefers and containerships. They also explore the implications of comparative freight rates in the reefer ship and containership sectors. A productivity analysis generated after the past reefer demand and supply are compared.

In this section seaborne import demand forecasts by commodity group are aggregated, and the conventional reefer or reefer container shares for each commodity group are forecast. It also estimates the future reefership fleet, reefer productivity and freight rates.

2.2 THE DRY CARGO MARKETAn average day, the commodities used and the raw materials delivered by Bulk Carriers.Bulk carriers are those ships that carry unpackaged commodities such as coal, ore or cereals. Part of the reason for their success t because they are exposed to the resources cycle: more coal or iron ore being mined in places like Australia and demanded in places like China obviously requires more dry bulkers to carry it all.

Figure 2: World Seaborne Trade of Major dry Bulk Commodities1980-2007

Based on foreign trade data weighted with shipment information (tone-miles), world seaborne trade in dry bulk commodities grew by about 146 mill tonnes to a total of 1.9 billion tonnes in 2006. During the last ten years, seaborne dry bulk trade increased on average by 5.7 percent yearly. With nearly 95 per cent in 2006 the shipments of coal, iron ore and grain reflected by far the most important shipping demand in dry bulk trades. In terms of tonne-miles, their share even amounted to 95.8 percent.

Figure 3: The Global Market for Bulk Commodities

3.0 MARKET TRENDS BY COMMODITY GROUPS

3.1 THE REEFER MARKET

Reefer Commodities

BananasDeciduous fruitCitrusTropical fruitMeatFishery productsDairy products

Figure 4: Reefer commodities.

million tonnes

1990 1995 1996 1997 1998 1999 2000 2001 2002

Bananas 8.77 11.67

12.13

12.22

11.86

12.64

12.99

12.46

12.75

Deciduous fruit

4.07 5.62 5.86 6.12 6.07 6.49 6.49 7.04 7.39

Citrus fruit

4.87 6.10 5.96 6.26 6.18 6.07 6.40 6.60 6.91

Tropical fruit

1.47 2.06 2.31 2.50 2.61 2.97 3.08 3.26 3.76

Meat 7.64 11.13

11.45

12.42

12.89

14.04

15.19

15.85

16.93

Fisheries product

8.23 9.98 10.60

10.81

11.21

11.70

12.50

13.38

13.86

Dairy Products

1.54 1.54 1.49 1.62 1.46 1.62 1.71 1.74 1.86

Total 36.60

48.10

49.80

51.94

52.28

55.53

58.36

60.33

63.46

Table 1: Seaborne Reefer imports by commodity group, 1990-2002.Source: Ocean Shipping Consultants Ltd.

Some trades and commodity groupings have become increasingly containerised, whilst the typically high-volume, homogenous and highly seasonal commodities continue to be largely dependent upon conventional reefer tonnage. Reefer containers have a longstanding hold on the frozen food trades for meat and dairy products.

3.1.1 Bananas

The banana trades are almost entirely seaborne and offer year-around employment to reefer operators, in contrast to the purely seasonal employment provided by the other fruit trades.

3.1.2 Deciduous Fruits

Deciduous fruits form the second largest group of conventional reefer cargoes. The pattern of seaborne trade in apples, grapes, pears, peaches, kiwi fruit and plums is described by major suppliers and markets.

3.1.3 Citrus Fruits

Citrus forms the third largest group of refrigerated fruit cargoes. This includes the seaborne trade in oranges, tangerines, lemons and limes, grapefruit and pomelos, and more unusual citrus fruits, by major importing and exporting countries.

3.1.4 Tropical Fruits

Tropical fruits form the most rapidly growing fruit market and, due to improvements in reefer technology, most trade is now carried by sea. The switch from airfreight has made these fruits accessible to larger numbers of consumers and expanded their market. The largest trade categories are melons and pineapples. Imports of mangoes and avocados are increasing rapidly, and papayas have also become increasingly popular.

3.1.5 Meat

The growth in the seaborne meat trades has been rapid during the last decade, and they now exceed trade in bananas. In these trades, reefer containers are the dominant means of transport, so lessening their importance for the conventional reefer industry. Growth has been general to all regions, but strongest in East Asia and the transitional economies. Meat includes poultry, bovine, porcine and ovine meat. The effects of periodic trade restrictions, introduced for health and other reasons, notably to contain BSE, foot-and-mouth and bird flu, are also considered.

3.1.6 Fishery Products

Global consumption of seafood has increased substantially and trade along with it. As per capita demand for seafood continues to climb and pressure on wild stocks along with it, an increasing share of demand is being met by the growth of fish farming. Fishery products include the trade in fresh/chilled and frozen fish, crustaceans, molluscs and cephalopods.

3.1.7 Dairy Products

The international dairy products trade is small-scale compared with other reefer trades and mostly containerised. Seaborne exports are dominated by Australasia and the European Union. 

3.2 THE DRY CARGO MARKET

Figure 5: Bulk carrier Fleet development 2008

Table 2: Dry cargo freight indices, 2005–2008

3.2.1 BULKER

Dry bulk trades comprise iron ore, coal, grain, timber, steel and other similar cargoes which are shipped in bulk as opposed to carried in containers or other unit loads.The importance of the dry bulk industry is that without the estimated million deadweight tons of dry bulk shipping, global trade, industry and ultimately our current lifestyles, could not be maintained.

Bulk carriers are ships in which cargoes are carried in bulk quantities rather than in barrels, containers, bags etc. and are usually homogeneous and loaded with the help of gravity. A bulk cargo is defined as a “loose” cargo that can be loaded easily and directly into a vessel’s cargo holds. These cargoes are usually cargoes of grain, coal, cement, soybeans, iron ore, steel pellets and in some cases fertilizers. The most predominant types of bulk cargo ships are the handymax and the anama types. Panamax bulk carriers continue to grow in cargo capacity as the pressure of worldwide competition has forced yards to build ships that can carry extra extra cargo.

3.2.1.1BREAK BULK CARGO

In shipping, break bulk cargo or general cargo is a term that covers a great variety neither of goods that must be loaded individually, and not in intermodal containers nor in bulk as with oil or grain. Ships that carry this sort of cargo are often called general cargo ships. The term break bulk derives from the phrase breaking bulk, a term meaning the extraction of a portion of the cargo of a ship or the beginning of the unloading process from the ship’s holds. These goods may be in bags, cases, crates, drums, barrels, or they may be kept together by baling or loaded onto pallets

3.2.1.1.1 BAGGED CARGO

The cargo should be stored on double dunnage and kept clear of the ship’s sides and bulkheads. Bags should be kept away from pillars and stanchions by covering with matting or waterproof paper.

Figure 6: Bagged cargo

3.2.1.1.2 BALED CARGOThese type of cargo should be stored on single dunnage at least 50mm thick.The bales should be clean with all the bands intact.Stained or oily bales should be rejected.Bags should be kept away from pillars and stanchions by covering with matting or waterproof paper.

Figure 7: Baled Cargo

3.2.1.1.3 BARRELS AND CASKS

Wooden barrels should be stored on their sides on "beds" of dunnage which keeps the middle of the side (the bilge) off the deck and they should be stowed with the bung at the top. To prevent movement wedges called quoins are put in on top of the "beds".

Figure 8: Barrels and Casks

3.2.1.1.4 CARTONSCartons (cardboard boxes) should be stored on a good layer of dunnage and kept clear of any moisture. They should not be overstowed with anything other than similar cartons. They are frequently loaded on pallets, so the slings that are used to load the cargo are frequently left on to facilitate discharge.

Figure 9: Cartons

3.2.1.1.5 CASED GOODSWooden cases or crates should be stored on double dunnage in the holds and single dunnage in the 'tween decks. Heavy cases should be given bottom stowage. The loading slings are often left on to aid discharge.

Figure 10: Cased Goods

3.2.1.1.6 DRUMSMetal drums should be stored on end with dunnage between tiers.

Figure 11: Drums

3.2.1.1.7 PAPER REELSThese are generally stowed on their sides but care must be taken to make sure they are not crushed.

Figure 12: Paper Reels

3.2.1.1.8 CARSThese are lifted on board and then secured using lashings. A great deal of care should be taken to make sure they do not get damaged. Vehicles must also be prepared by ensuring potentially hazardous liquids (gasoline, etc) have been removed.

Figure 13: Cars

3.2.1.1.9 STEEL GIRDERS

Any long heavy item should be stowed fore and aft. If they are stowed athwart ships they are liable to shift if the ship rolls heavily and pierce the side of the ship.

Figure 14: Steel Girders

3.2.1.1.10 PROJECT CARGOThe Port of Antwerp has years of experience in handing project and heavy lift cargo from train carriages to windmills, heavy machinery, oil well supplies, manufacturing equipment and cranes.

Figure 15: Project Cargo

3.2.1.1.11 FOREST PRODUCTSHandling an annual volume of around 2.7 million tonnes of no containerized forest products, the Port of Antwerp offers dedicated terminals and specialized warehouses for all kinds of products from paper and pulp to wood, timber, plywood, etc.

Figure 16: Forest Products

3.2.1.1.12 FRUIT

The Port of Antwerp has some of the most sophisticated infrastructure in the world for the handling of fresh produce including refrigerated warehouses, Europe’s only automated storage system and a range of value-added services such as (re)packaging, quality control and ripening.Page (

Figure 17: Fruits

3.2.2 Tweendecker MarketTweendecker ship usually transported one type of cargo a time. The cargoes that transported by tweendackers ship is almost the same with the bulk carrier such like grain, corn, rice and sugar.

3.2.2.1 GrainGrain is the grasses that are cultivated for the edible component of their fruit seed.

Figure 18: Grains3.2.2.2 RiceRice is the most important food for the large part of the world human population especially in Asia. Rice most produced in Thailand, Burma and Southern China.

Figure 19: Rice

3.2.2.3 SugarSugar is a term of edible crystalline substance. They have the sweet flavor and the most important part in daily human diet. The most country that produced sugar is Brazil and India.

Figure 20: Sugar

3.2.3 CONTAINER MARKET

Growth in the liner shipping market has been relatively rapid in comparison to other major shipping sectors such as tankers and bulk carriers. Demand for shipping was strong in the last few years, with world container trade grew at an annual rate of 10% from 1999 to 2008. Global container volume carried in 2008 was estimated at 138 million TEU. In 2009, due to weak global economic conditions, world container trade is expected to contract by 6%-8%.

Figure 21: World Container Trade & Annual Growth.Source:Clarkson Reaseach Services Limited

3.2.4 RO-RO MARKET

Roll-on/roll-off (RORO or ro-ro) Ships are vessels designed to carry wheeled Cargo such as Automobiles, Trucks, Semi-trailer trucks, Trailers, or Railroad Cars that are driven on and off the ship on their own wheels. This is in contrast to lo-lo (lift on-lift off) vessels which use a Crane to load and unload cargo. RORO vessels have built-in Ramps which allow the cargo to be efficiently "rolled on" and "rolled off" the vessel when in port. While smaller ferries that operate across Rivers and other short distances still often have built-in ramps, the term RORO is generally reserved for larger ocean-going vessels. The ramps and doors may be stern-only, or bow and stern for quick loading.

3.2.5 LINER MARKET

Liner service provides a transport for cargoes those are too small to fill a single ship and need to be grouped with others for transportation.The liner operation must be able to Offer a regular service for many small cargo consignment and process the associated mass of paperwork. Besides that, Charge individual consignment on a fixed tariff basis that yield an overall profit- not an easy task when many thousands of consignment must be processed each week.

3.2.6 SMALL SHIP MARKETSmall ship refer to the vessel that with the 10000 tons deadweight tonnage or below. Most of the small ship market engaged in short sea and coastwise shipping. It Have its own information system and channel of communication which function independently.

3.2.7 SPECIAL CARGO MARKETDue to the demand, there are few type of the special vessel invented to meet the special need/ demand.

3.2.7.1 HEAVY-LIFT CARRIERSThis type of vessel was designed to move very large loads that cannot be handled by normally equipped ships. They are of two types: semi-submerging capable of lifting another ship out of the water and transporting it and vessels that augment unloading facilities at inadequately equipped ports.

Figure 22: Heavy-Lift Carriers

3.2.7.2 BARGE AND PONTOONSBarge is a flat-bottomed boat, built mainly for river and canal transport of heavy goods. Most barges are not self-propelled (Dumb barge) and need to be moved by tugboats towing or pushing them. Barges are still used today for low value bulk items, as the cost of hauling goods by barge is very low. The barge cargo holds normally are suitable for the carriage of dry or liquid cargo. Pontoons are designed to usually carry deck load or working equipment (e.g. lifting equipment, rams etc.) and have no holds for the carriage of cargo.

Figure 23: Barge3.2.7.3 TUGBOATTugboat/ tug, is a ship used to maneuver, normally used for towing other vessels inharbors/port over the open sea or through rivers and canals. They are also used to tow barges, disabled ships, or other equipment.

Figure 24: Tugboat

3.2.7.4 BARGE CARRIER Barge carrier normally refers to the ship that using Lighter Aboard Ship (LASH) system. The LASH system refers to the practice of loading barges (lighters) aboard a larger vessel for transport. The host vessel is normally purpose built or modified with a door at the waterline, to allow the payloads to be loaded and unloaded without special lifting equipment.

Figure 25: Lighter Aboard Ship (LASH)

4.0 FACTORS INFLUENCING DEMAND

4.1 Consumer Expenditures and General Economic Conditions

Figure 26: Consumption for Gross Domestic Product per capita.

A) Low income, basic needs coverage.

B) Rising income changing spending (eating) habit. Economy in focus by multinationals (Distribution network/promotion).

C) Consumption reaches top point. Rising income triggers substitution to more sophisticated fruits.

REEFER MARKET

Income affects the amount of product that consumers are willing and able to buy. There is a direct relationship between a consumer’s income and the

A Theoretical Approach

A B C

GDP per capita

Consumption pr. capita

0

2

4

6

8

10

12

14

Russia

1930

SaudiArabia6870

Germany

25280

USA

25820

OtherE. Eur.2355

OtherW. Eur.1)

25927

OtherEU

19755

amount of the goods that one is willing and able to spend on. In other words, when income rises, the demand for the refrigerated product will increase; when income falls, the demand for refrigerated product will decrease.

The type of products purchased depends on the income too. For example, higher income groups purchasing fish and fish products in the higher price bracket. Packaging, presentation and brand loyalty are important to these consumers. The middle income urban consumer purchasing cheaper imported fish and fish products, such as fish fingers, fish cakes and frozen hake fillets. Low income consumers purchase the cheaper varieties of fish available on the market such as frozen horse mackerel. Middle and high income consumers are able to afford higher value products, and focus on imported products.

Consumer purchasing power is determined by the general economic development. The world economy had a growth of 3% p.a. the last few years and estimates from OECD suggest a similar growth the years ahead. This should have a positive impact on the demand for reefer transportation services.

60 % of cargo volumes in the reefer market are exported from countries with US dollar economies whereas euro economies account for about 50% of the imports. The USD-Euro exchange rate therefore affects market purchasing power. A strong Euro will support European and reduce US imports, increasing transportation distances and demand for ships.

The demand growth in the reefer market has historically run at about 4% per year. The combination of strong economic growth and a strengthening euro bring expectations for a solid growth in demand in the years to come. The improving economic conditions and drastic change in consumption pattern has in turn propelled the growth of the reefer market. Economic growth will increase restaurant sales and demand for frozen products in general. Global GDP growth rate is currently around 4% with higher figures in developing countries such as China with 10%.

Factors such as wages and income, indirect tax, employment, wealth distribution and inflation could affect the percentage of disposable income spent on the product. The demand curve will be shifted and affect its elasticity.

DRY CARGO MARKET

Due to the global economic crisis, the A.P. Moller(Maersk Group),the the Leader Largest Container Shipping Company in the world, was significantly affected. A 3% contraction in the total global economy in the first half of the year, and resultant substantial declines in global trade, had a negative impact on the Group, primarily by way of declining volumes and rates for the container shipping activities and lower activity in a number of other business areas.

For the first half of 2009, Group revenue was DKK 127,389 million compared to DKK 148,365 million in the same period of 2008, corresponding to a decline of 14%, primarily reflecting lower freight rates and volumes in the container shipping activities and the lower average oil prices.

Figure 27: Group Profit /Loss (2008-2009)

4.2 Currency Exchange Rates

The currency exchange rates have an effect on how competitive imports are. The currently weak dollar makes imports expensive and thus leads to a decrease in supply.

As a rule, rates in shipping are negotiated and paid in US Dollar. Due to this fact, ship-owners try to have their costs also in this currency. Ships tend to be financed in US Dollar; the crew is paid in US Dollar and so on. However, some costs are paid in other currencies (port and turnover costs) and in the home currency (administration costs).

As an example, when German ship owners’ costs arise for 80% in US Dollar and 20% in Euro, then currency fluctuations between the US Dollar and the Euro impact the financial result of German companies. Under the assumption

of stable rates an evaluation of the US Dollar would result in an increase of profits of German companies and vice versa.

The US Dollar always has been the most important currency in shipping. If the dollar increases, the rates decrease. While if the dollar decreases, the rates increase.

4.3 Non Economic Variables

4.3.1 Changes in consumer preferences/tastes/trends

This is a less tangible item that still can have a big impact on demand. There are all kind of things that can change one’s tastes or preferences that cause people to want to buy more or less of a product. For example, when a new health study comes out saying something is bad for health; this may decrease the demand for the product.

The emergence of new diseases and the trend towards an ageing population in several countries leads to an increase in demand for nutrition with low cholesterol (fish).

4.3.2 The affect of political decisions (Import ban, taxes)

Political decisions also tend to have a strong influence on market trends. For example, Russia has had import restrictions on meat throughout 2006 while the avian influenza still makes the situation for poultry exports uncertain. Such events can be difficult to predict and evaluate.

Japan and Korea were the two biggest markets for US beef before it was banned in December 2003. Because of global health scares connected to avian flu, sales of US poultry are also flagging. The westbound trans-Pacific reefer market has shrunk to about 320,000 TEUs in 2006, a 27 percent decline from 2001 due to the influenza.

Australia and Brazil have been among the global sales winners following the discovery of mad-cow disease in the US in December 2003. Argentina exported 565,000 tons of meat to all destinations in 2006, compared with 773,000 tons in 2005. The government restricted the levels of export to maintain price stability domestically. As a consequence of lacking shipments for frozen and chilled meat to North Europe, shipments of Argentinean fresh fruit increased to regain the market share lost.

Beef exports are expected to go up again when most of the countries have lifted trade bans.

4.3.3 Availability of domestic volumes

Availability of domestic volumes either from own production or from volumes in continued improved storage facilities affect the demand too. The growth in gross domestic product has resulted in people spending more on consumables and beverages. The growing number of retail stores is also a clear indicator of the increase in consumer spending.

4.3.4 Climatic factors

Reefer Market

Reefer ship rates are always highest during February to May. This is because fruit from the Southern Hemisphere is harvested and shipped in these months to the Northern Hemisphere where the majority of well-funded people live.

Weather phenomena affect crops. The freezing weather in Florida translated into export levels of grapefruits and lemons down 37.2 percent from 2004.

Dry Cargo Market

The combined effect of weather conditions, increased bio fuel production, increased demand for food items that depend on grains (e.g. meat) and rising oil prices (e.g. fertilizers) have contributed to current hikes in food prices. Weather conditions have caused poor harvests in some grain exporting regions, such as the European Union and Ukraine, while droughts have damaged crops in Australia. Bio fuel production is competing with food consumption needs since, in addition to being the main food staple in many countries, grains are used as inputs in the production of bio fuels. Similarly, increased demand for animal-based products such as meat and dairy leads to increased demand for grain-based animal feeds. Furthermore, rising oil prices increase agricultural production costs (e.g. energy and fertilizers), which ultimately lead to increased food prices.

4.3.5 Banana regime up for revision in 2006

The European Union (EU) banana regime includes fresh and dried bananas (excluding plantains), frozen, provisionally preserved and prepared bananas,

banana juice, banana flour, meal and powder. The main aim of the EU banana regime was to organise the market that would allow the Community market to receive satisfactory supplies of quality bananas at fair prices for producers and consumers besides ensure a balance between the various sources of supply.

5.0 FACTORS INFLUENCING SUPPLY

Figure 28: World Reefer Fleet-On order and Scrap1991-2003

5.1 ORDER BOOK

REEFER MARKET

The container ships’ reefer carrying capacity has increased substantially for a long period, and there is still a large order-book. On the other hand, we have not seen any material change in the containers’ share of the reefer transport; estimated to be slightly above 50%. A reduced fleet of specialised reefer vessels and an increasing market will however inevitably increase the containers share the next years.

The number of newbuildings has fallen in the same period and the last four years annual deliveries equals 0.2% of the fleet. Consequently, the reefer ship fleet has been reduced. Although the market has improved the current order book is not more than 2.0%. Delivery of newbuildings on a considerable scale will hardly be possible the next few years due to extensive orderbooks in other shipping limiting yard slot availability. We therefore expect the reduction in the specialised reefer ship fleet to continue the coming years.

DRY CARGO MARKET

-Dry Bulk Cargo ShipIn virtually all economies, the unprecedented financial crisis has led to a sharp contraction in investment, economic activity, employment and international trade. While initially shipbuilding was to some degree insulated from these effects because of very strong order books, in the last six months new orders have fallen by over 90% and cancellations are increasing.

Figure 29: New Building Dry Bulk Ships

-Container ShipThe capacity of vessels on order as of January 1, 2008 was 63.7 percent of the existing fleet, compared to 46.3 per cent one year earlier. During 2007, the amount of new orders surpassed the ship deliveries. While 410 container ships with 1.3 mill/TEU (8.9 mill cgt) left the order book after completion, 777 container ships with 3.9 mill TEU (23.0 mill cgt) were added. At the beginning of 2008, the total order book stood at 1,518 container ships equal to 6.9 mill TEU or 41.5 mill cgt espectively. Looking at the estimated delivery date, 1.7 mill TEU is due for delivery before 2009, 1.7 mill /TEU will be available in 2009, but the largest part (3.4 mill/TEU) will be delivered after 2009. 108 new orders had capacities of 12,000 TEU+, the delivery date for these giants is scheduled for 2010 and later.

Figure 30: World container and general cargo order book, quarterly 2001 – 2008 (mill cgt)

5.2 SCRAP (SHIP RECYCLING)

-REEFER MARKET

Vessels can be sold for scrap. The reefer market will benefit from the scrapping of older tonnage. With the growth in the size of reefer vessels over time, coupled with the scrapping of older, smaller vessels, growth rate increased. Scrapping of specialised reefer ships has averaged 3% of the fleet the last ten years. The average age of the fleet is nearly 20 years. Although a strong reefer market may postpone the scrapping somewhat, an equivalent scrapping level will be the best.

-CONTAINER SHIP

Only a few ships are scrapped; average age of existing container ship fleet is only 11 years (world merchant fleet: 19 years). Pressure on freight and charter rates will remain high due to excess capacities. Forecast for new capacity may be too optimistic and for scrapping too cautious.

Figure 31: Container ship (New Capacity and Ship Scraped)

6.0 THE FUTURE

THE REEFER MARKET

Cargo volumes are forecast to increase and while this will inevitably lead to a reduction in market share for the specialised reefer vessels, it may not result in a reduction in actual tonnage carried by the specialised reefer fleet. Despite successful efforts to consolidate and cut costs, future initiatives are crucial to the survival of this market. The specialised reefer industry needs to focus on alternate ways of ensuring its longevity to maintain healthy competition in the reefer market.

In recent years, the trade in fresh products has expanded steadily. This happened because of increasing economic growth and wealth in East Asia and the transitional economies. However, the past decade has show that the share of conventional reeferships decreased year by year in competition with containerships.  

After several terrible years for the reefer shipping trade, 2002-2004 brought a recovery for conventional reefer and containership in freight rates and it was benefited to them. However, the order book for containership new building is at an all-time high.

This study analyses recent trends and the complicated dynamics of a market, which is defined not only by the supply or demand balance in the reefer industry, but also by that in the container shipping industry. Forecasts to 2015 are developed for the trade in frozen goods, by commodity and type of vessel.

In this case, we are outline technical developments in reefership construction, especially those designed to allow conventional reefers compete effectively with the container industry.

The reefership and containership fleets, and their associated reefer capacity are analysed. While, the reefer operations of both reefer and container carriers are profiled. The current new building activity and the type of vessels being built are also reviewed. The implications of current low ordering on capacity in the reefership fleet and of large-scale ordering on containership capacity are evaluated.

Imports and exports of seaborne fresh product cargoes are analysed by source and destination since 1990. Below are the lists of the commodity groups covering in this industry:

● Bananas & plantains

● Deciduous fruits: apples, grapes, pears, peaches, kiwi fruit, plums

● Citrus fruits: oranges, tangerines, lemons & limes, grapefruits, pomelos

● Tropical fruits: melons, pineapples, mangoes, avocados, papayas & others

● Meat: poultry, bovine, porcine and ovine

● Fishery products: frozen, chilled & freshwater fish, crustaceans, molluscs & cephalopods

● Dairy products: butter & cheese.Forecasts of demand growth are derived for each of the trades by

major importing region. The forecasts are aggregated, and the conventional

reefership and containership shares of future trade are also predicted. Future productivity and reefer freight rate levels are calculated by relating the conventional reefer trade forecasts to anticipated fleet capacity growth and the likely interaction of containership freight rates.

Based on current economy forecasts, the reefer trade should show strong growth with world trade in fresh products set to increase from 134.8 million tonnes in 2006 to 199.5 million tonnes in 2015. Seaborne perishable reefer trade should mirror this trend. Although the specialised reefer fleet is set to decline by an estimated 4% by 2011, profitability should increase or better. Question mark hags over time charter rates. As the containers fleet increase in capacity, owners and operators will want to fill reefer capacity which in turn will put pressure on time charter rates for the specialised reefer sector. However, this should be counter by overall cargoes increase

THE DRY CARGO MARKET

According to the IEA’s WEO 2007, demand for coal is expected to grow by 73 per cent between 2005 and 2030. The main source of growth is the emerging developing economies, particularly China and India. In contrast, coal use in OECD countries grows marginally, with most of the increase coming from the United States. As previously noted, the concern with increased use of coal is the related significant carbon footprint. Coal is a big polluter and contributor to greenhouse gas emissions. Although emissions per capita remain lower, by 2010 China is expected to overtake the United States as the world’s largest polluter. The question that remains is how climate change mitigation objectives could be reconciled with growing energy needs and use of coal as a supplement and alternative to oil and gas. In this context, the efficient and rapid deployment of relevant technologies

(e.g. clean coal and carbon capture and storage) is necessary to ensure a sustainable use of coal that contributes to ensuring global energy security as well as improving the environmental performance of coal.

Figure 32: Seaborne Iron ore Demand.Source: BHP Billiton

7.0 CONCLUSION

THE REEFER MARKET

Reefer market is volume intensive and predominantly serves the global food industry. It is more directly affected by environment related regulations for both the fuel and the refrigerants consumed by the industry. Reefer market benefits from new trade policies and simplification of processes resulting from growing relationships between countries. Drastic changes in the disposable income of middle class population across the globe affect demand growth for premium foods, which in turn influence reefer market.

In conclusion, market improvements will help but not change the situation for the specialised reefer operator who needs to continue reducing costs, become even more efficient and better utilise the fleet. Any future imbalance between supply and demand that would support a major rate hike will swiftly be rectified by bringing more capacity into the market, by either specialised reeferships or reefer containers or both. Once the present wrestling for dominance among container operators tapers off, the true transportation cost will be revealed, to the advantage of the specialised operators, who will have restructured and enhanced their businesses for optimum utilisation.

To serve the new emerging customer base, the specialised reefer operators will have to broaden their service and integrate it into a 'door-to-door' concept. They need to create alliances with forwarders, truckers and cold-storage providers and eventually even with selectively chosen competitors, whether specialised or containerised, thereby achieving 'co-opetition'. This will provide the service, the strength and the cost-efficiency required. These operators' built-in flexibility and the lean but hands-on operation will continue to provide a dynamic and creative alternative to the reefer industry and its customers.

THE DRY CARGO MARKET

Even thought the economic recession, the fundamentals of the dry bulk industry remain attractive with demand for dry bulk commodities continue to be positive. The primary driver for the dry bulk shipping industry continues to be sustained demand in East Asia led by strong demand for commodities in China and India. With China`s import of 2 billion tonnes of iron-ore, coal and grain in the year 2007 and its steel production increasing by 16.5% in the same year, the global dry bulk industry is expected to continue its growth momentum, although it will show at a slower rate in the next few

years. Further with high growth of Indian economy and scarcity of its natural resources, India is likely to continue its demand for dry bulk commodities. The demand for two commodities which are coal and iron ore will drive the dry bulk industry in the near future.

As the demand for steel is growing, especially in the Asian countries, iron ore is expected to see the highest growth among the dry bulk commodities. Further, coal is also likely to be much-in-demand commodity with new power plants being installed in the Asian countries. The demand for two commodities - coal and iron ore will drive the dry bulk industry in the near future. As the demand for steel is growing, especially in the Asian countries, iron ore is expected to see the highest growth among the dry bulk commodities. Further, coal is also likely to be much-in-demand commodity with new power plants being installed in the Asian countries.

8.0 APPENDIX8.1 THE REEFER MARKET

Table 3 :Vegetable Production, Selected Asian Countries 2002-2006 (in metric tons)

Table 4: World vegetable production (in metric tons) by continent and regional groupings (2002-2006)

8.2 THE DRY CARGO MARKET

Figure 33: The Major Dry Cargo Trades (Coal, Grain, Iron Ore)

Table 5: Major sources / seaborne exporters of commodities

Figure 35: Major bulks (coal and grain): producers, consumers and traders in 2007

(World market share in percentages)

Figure 34: Major bulks ( steel and iron ore ): producers, consumers and traders in 2007

(World market share in percentages)

9.0 LIST OF REFERENCESTHE DRY CARGO MARKET

Arkaprava Ghosh(2009).MBA Summer Internship Report [Analysis of Break Bulk Shipments].India: Larson & Toubro

Department of Trade & Industry Philippines (2007). Lantapan Vegetable Industry Profile. Philippines: Municipality of Lantapan Province of Bukidnon

Mr. Medhat Saad Eldin (2009).Global container industry 2008/2009 Analysis Report of the markets' Crises.

UNCTAD secretariat (2008).Review of Maritime Transport 2008.

United Nations: New York and Geneva

THE REEFER MARKET

Commonwealth Business Media, 2007. Reefer vs Container.[online] Accessed: 15 Jan 2010 http://www.coolcargoes.com/content/?p=22

Lloyd’s Register, Y. 2004. Shipping Market Forecast. Fairplay Research, Sweden. Corden, W. M. 1974 Trade Policy and Economic Welfare, Oxford: Clarendon Press.Ocean Shipping Consultants, Y. 2005. Refrigerated Trades and Outlook to 2015. Study Sales Department, England.

CoolCargoes(2010). Reefer vs. container.[Online ]Accessed:15 Jan 2010 http://www.coolcargoes.com/content/?p=22

PRLog Free Press Release(2010). Annual Reefer Shipping Market Review and Forecast 2006/07.[Online] Accessed :16 Jan 2010http://www.prlog.org/10018950-annual-reefer-shipping-market-review-and-forecast-2006-07.html

Access My Library(2010). Reefer market improve, stimulating investment.(Refrigerated transportation trends and forecast)[Online] Accessed: 16 Jan 2010http://www.accessmylibrary.com/coms2/summary_0286-9736280_ITM

PRMinds(2004). Annual Reefer Shipping Market Review and Forecast 2007/08.[Online] Accessed:16 Jan 2010.http://www.prminds.com/pressrelease.php?id=4781

Reedfer Shipping Online(2010). From innovation to application.[Online]Accessed:16 Jan 2010http://www.mar-media.com/reefer/pages/page2.htm