The conflict in Eastern Europe has the potential to bring severe disruption to reefer shipping, particularly given the significance of Russia as both a key import and export market. But any reduction in cargo demand will at least provide some respite to cargo owners desperate for space and relief from spiralling freight costs.
Both Russia and to a lesser extent Ukraine are important players in the reefer market. Drewry estimates that combined they account for around 4.5% of overall annual seaborne refrigerated traffic. Any disruption to trade will bring significant impacts for cargo owners, container carriers and specialised reefer ship operators.
Russia alone imported approaching 4 million tonnes of fresh produce by sea in 2021, 40% of which was bananas, primarily from Ecuador, and a smaller balance from Central America. Drewry estimates that around 50% of the banana volume to Russia is carried in containerships, equating to some 600 x 40’ reefer boxes per week on average, with the balance in two weekly specialised reefer ship services. These volumes tend to be higher during the first half of the year.
If this trade stops or slows there will be a surplus of equipment and space which will likely bring short term respite for shippers of seasonal produce from the West Coast of South America, which are currently struggling for capacity to both Europe and North America. The wider implications for the fruit exporting business will be felt very fast, as traditional markets become oversupplied with produce, putting pressure on prices. The aspect of freight payments and partial cargo payments, always in US Dollars, for cargo which is already on the water will complicate things further for cargo owners, receivers and vessel owners.
Deciduous volumes from Chile, Peru and Argentina will be impacted immediately as all countries are in the midst of their export seasons right now. Meanwhile, citrus traffic from Morocco is ending but South Africa and Argentina are the next ones in line as from May.
Brazil is an important meat supplier to Russia with year-round volumes accounting for the lion’s share of its estimated 325,000 tonnes of yearly imports.
Direct Ukrainian bound cargo of bananas is approximately 250,000 tonnes per year, with lesser amounts of citrus and deciduous normally coming from closer by, particularly Egypt and Turkey. Direct cargo services into the Black Sea have stopped with immediate effect placing a severe logistical challenge for cargo which is already on the water.
But tramp shipping, including specialised reefer vessels, is a highly flexible mode of transport that can easily adapt. If cargo demand sustains but is throttled by container carrier reluctance to serve the war-torn region, it may create an opportunity for operators of specialised reefer ships, assuming they are allowed to.
On the export side, Russia ships close to 1.4 million tonnes of seafood every year, much of it caught in the rich waters of the Sea of Okhotsk, which is transhipped at sea to largely Russian flagged reefer vessels. This catch is for a big percentage discharged in China for re-processing and/or onward re-exporting to countries all over the world. There is little reason to believe that this trade will be impacted in the short term, unless China takes the unlikely measure to ban Russian flagged vessels from its shores.
So the overall impacts are expected to be mixed, with import trades more affected than export reefer traffic, in the short term at least. Looking further ahead, a prolonged conflict is expected to see perishables trade diverted to new markets, creating opportunities elsewhere.