Shipping giant MSC: "It’s important that we all collectively do a better job of managing through the crunch period"
Amid the worldwide pressures brought by the COVID-19 pandemic, Geneva, Switzerland-based global shipping and logistics solutions provider Mediterranean Shipping Company moved a record number refrigerated containers in the last year, and saw a sustained growth in seafood shipments, according to MSC Netherlands Reefer Manager Dennis Alibux.
In an interview with SeafoodSource, Alibux said due to the pressures and unprecedented demand for surface-transport solutions, exporters are likely to see reefer freight rates remain high for the time being, but that investments are being made that should ameliorate the situation in time.
SeafoodSource: What volume of goods is MSC now shipping via refrigerated containers, and how does this compare to five years ago?
Alibux: In 2020, MSC delivered a record 1.9 million 20-foot equivalent units (TEUs) of reefer cargo and over 28,000 TEUs of cold-treatment shipments. These figures top the previous year’s records and maintain the steady growth we’ve seen in our reefer business as we expand to match demand. Global demand for fresh fruit shipped by reefer container has grown by as much as 40 percent over the last decade. Since 2016, we have also seen demand for seafood steadily rise, with the total volume of seafood shipped with MSC nearly doubled from 2016 to 2020.
In order to meet an increased demand for our reefer cargo service for the wide range of products we ship to existing and new destinations around the world, we have been expanding our reefer fleet for temperature-sensitive cargo, notably by adding 15,000 Star Cool units (reefers) in 2020. Further developments in our services can be found in our Gülsün-class containerships. Thanks to their improved design and larger size, these giant ocean-going vessels can carry more than 2,000 refrigerated containers. The increased capacity has helped service the high volumes of trade activity between Europe and Asia, boosting the trade of chilled and frozen products.
SeafoodSource: How much of the current volume is fish and seafood?
Alibux: In 2020, seafood represented almost 10 percent of all reefer cargo that was moved over the year. Of that, frozen fish is the most popular product, representing 41 percent of the seafood product that was transported.
The transport routes are varied. The top five ports of loading are mostly located in South America, with Europe also represented. The top five ports of destination are each on a different continent, with one in North America, South America, Europe, Africa, and Asia, respectively. No single port represents more than 15 percent of volume, highlighting the diversity of goods and routes that our customers use our services for.
SeafoodSource: What important technological changes have been brought to the reefer sector recently, and what have been their main benefits?
Alibux: MSC’s advanced reefer technology is used to transport all perishable goods. Reefers are continuously powered, temperature-controlled containers that keep perishable products and temperature-sensitive cargo fresh for the entire journey – from truck, to train, to barge, to ship, and every step in between. They are how we keep food safe and in top quality condition over long distances.
Because most of the seafood we carry is deeply frozen, there is less of a direct need to drive technological advancements on the container itself. We explore how digital innovation can help enhance operational efficiencies and provide a better customer experience. We strive to ensure transparency throughout our process with our customers and establish strong relationships. A key example of this is our drive toward the use of electronic bills of lading (eBL), which enable all parties involved in a cargo shipment booking to issue, transfer, endorse, and manage the bill of lading document electronically through an independent blockchain platform, without any disruption to business operations. The application is available for shippers, importers and traders of all sizes and industries worldwide, including seafood, and requires no additional IT infrastructure or operational change. MSC’s eBL brings key benefits such as speed, simplicity, savings, security, and sustainability. Existing customers across the globe have described MSC’s eBL as easy to use and convenient, especially during the COVID-19 pandemic, where the eBL addresses a very current need. It enables shippers to overcome border restrictions, interruptions in postal services and other pandemic-related disruptions. Keeping cargo moving is essential and by dematerializing the BL, we give shippers the ability to enable employees to work remotely.
SeafoodSource: Reefer freight rates have soared in the past year. What are the main reasons for this, and what solutions will MSC implement to address the situation?
Alibux: It is true that market freight rates are now at a level which we have not seen for many years due to the dynamics of supply and demand and the ongoing impact of the pandemic, compounded with the Suez disruption in April, the congestion in southern China in May and June and the halting of operations at Ningbo, the world’s third-busiest box port, in August.
MSC continually invests in vessels (both new and chartered) and containers to maintain as much capacity as possible to meet the demands of the market. Clearly, no one could have planned for the type of surges that are stressing the container transportation network at present. The system will ultimately return to a healthier equilibrium, with steadier volumes coming in, but it’s important that we all collectively do a better job of managing through the crunch period. We all look forward to the normalization of the market, but it is not yet clear when that will occur.
SeafoodSource: In what ways has the COVID-19 pandemic affected MSC’s business, and how has MSC responded to the obstacles that have popped up for it in the past year?
Alibux: The primary concern of COVID-19 for MSC has been the impact on the health of our people, both ashore and at sea. MSC campaigns for better recognition of the role of seafarers in keeping global trade moving and has made various appeals to governments to make crew changes easier during the pandemic after hundreds of thousands of sailors got stuck at sea. We continue to advocate for these key workers to be prioritized for travel and for COVID vaccinations.
In terms of the market impact, we saw a sudden drop in demand in Q1 2020 as China shut down, followed by an incredible resurgence in demand in the third quarter and after. The wild swings in demand overwhelmed supply chains in some areas and had an unprecedented impact on the systems in which we and our customers operate. Port congestion, equipment shortages, and other factors led to a systemic overload of demands on cargo transportation and logistics.
SeafoodSource: What is your anticipation of future demand for your services?
Alibux: Even in mid-late 2021 we are still dealing with the impact of the demand swings throughout the pandemic, despite the carrier industry having injected capacity and modified service networks. We hope for a return to a more normalized market soon, but we can see these effects continuing a while longer until a greater number of governments have COVID more under control.
SeafoodSource: What are your longer-term forecasts for the reefer sector?
Alibux: The rise of reefer container shipping is expected to continue long into the future and MSC will continue to play its part in unlocking new opportunities for producers, exporters, importers, retailers, and end-user consumers. We continue to see significant demand for our services, and we continue to invest in reefer container equipment and technology to meet that demand. Overall, the year-over-year trend of TEUs of seafood products shipped with MSC has steadily increased since 2016. The total TEUs in 2021 to date has already surpassed the totality of 2016, and despite the ongoing impact of COVID-19, shows signs of continued growth. Continued economic growth around the world has led to an ever-growing and expanding middle class. This growth drives consumer spending, especially on food, and we see fish and seafood as a high-priority purchase for this group. As the middle-class continues to expand, demand for seafood (and other reefer products such as fruits and vegetables) will continue to grow.
Due to IMO 2020 [a rule requiring cuts to sulfur oxide emissions], we expect conventional reefer ships to slowly vanish from the market as it is projected that the costs will be too high for them to maintain their services. As the bunker decreased in 2020, these vessels were still on the market, but now the bunker is increasing again. While the split is currently approximately 85 percent containerized and 15 percent conventional, this could shift to an even wider split towards containerized reefer shipments in the coming years.
SeafoodSource: What other services does MSC provide to the seafood industry besides shipping?
Alibux: At MSC, we are keenly aware that it is not only about the transport of cargo on the sea. The capacity to store cargo and containers is crucial to our customers' supply chains. That's why we're constantly focusing on storage and distribution. We are proud to provide door-to-door logistics services to our customers with a global network of warehouse and storage facilities, enabling them to transport their cargo to anywhere in the world.
MSC's cold-storage capabilities allow us to offer our customers greater speed, efficiency, and flexibility in their supply chains when transporting frozen or temperature-controlled goods. Our warehousing network – spanning millions of square meters – means we offer broad door-to-door service integrity. Many of our warehouses also provide comprehensive picking/packing, palletizing, bulk handling, and warehousing services. As a result, MSC will not only transport goods quickly and safely, but will also play an important coordinating role in the distribution network.
Photo courtesy of Mediterranean Shipping Company