Sea freight monthly review: April 2019

After a busy Q1, which saw the reefer fleet fully employed, April was a predictable disappointment for operators in both the large and small segments. Following the Chilean grape season, the large units move to New Zealand for the kiwifruit, to South Africa and Argentina for the citrus and to the tropics for contract and spot banana business. Although New Zealand now starts earlier due to the growth of Gold kiwifruit volumes, there is a gap before the start of southern hemisphere citrus and this left some units at a loose end.

There was little-to-no assistance to operators from the banana trade as the forecast heavy volume of surplus Ecuadorian bananas never materialized. Spot chartering remained limited partly because the exit price did not fall low enough for long enough. The price was to some extent supported by the majors, who were forced to buy fruit in Ecuador to supplement short supply in drought affected Colombia and Central America, and by the relative shortage of export grade fruit following heavy rainfall in February and March.

Just over a decade ago, the reefer mode could rely on Argentinean topfruit shippers to help cover the transition from Chile. Alas, no longer! The announcement at the end of the month that Greenyard subsidiary Expofrut would cease exporting is symptomatic of the tragedy afflicting Argentina’s apple, pear and table grape industries. For perspective, in 2005, Expofrut was Argentina’s largest apple and pear exporter, itself shipping 170K MT of fruit through San Antonio Este. In 2018 the industry export total was no more than 190K MT, the majority of which was shipped in containers.

The small segment suffered from a poor catch in Mauretania and weak demand in West African markets where coldstores were full. By the end of the month the Open List had lengthened to a point that the benchmark Mauretania to West Africa voyage rate was under pressure. For the fourth successive year the squid catch in the Falkland Islands frustrated operators: if the cyclical nature of its behaviour is proven to be true next year, this should in retrospect not have been a surprise!

On S&P, both GreenSea and Alpha Reefer have shed vessels from their respective operational pools as a result of activity. The Bay Phoenix, Green Glacier and Green Toledo were sold to Far Eastern interests. Meanwhile the Frios Petropavlovsk, Murmansk and Arkhangelsk are back under the control of Artic Shipping, while the Andromeda converted into a cattle carrier and the Reina was demolished. Far from bemoaning the net loss of tonnage to the segment, operators are confident that a tightening of supply will only serve to benefit the market in the long term. At current newbuild cost rates, re-investment in the segment can only be justified on a near 100c/cbft TCE long-term yield.

sea freight - monthly spot average

sea freight - large reefers

sea freight - small reefers