Big ships, more alliances and slow steaming are the 'new normal' for Latin reefer container trades, heard delegates at the Cool Logistics Americas conference in Sâo Paulo

Expect and adapt to the reality of bigger ships, more alliances and continued slow steaming in the Latin reefer container trades. This was a central message from Julian Thomas, CEO Region East Coast South America for Hamburg Sud and Aliança, in his keynote address to shippers and other members of the Latin perishable logistics community at the 1st Cool Logistics Americas conference in Sâo Paulo in May.

Mr Thomas told delegates that Hamburg Sud will invest US$122 million this year in 6,000 new 40ft high cube reefer containers, buying 2,000 for replacement and 4,000 to grow its fleet to 54,000 units. But he cautioned that the financial situation of container carriers was still extremely tight, with average operating margins stuck in the red for most of 2013. The focus would therefore remain on cost control.

The shift towards larger ships already seen on east-west routes is also taking place in north-south trades and will, if anything, accelerate over the next few years, said Mr Thomas: "To cope with the reefer demand and drive down costs our vessels are getting bigger." At 9,600TEU and with 2,100 reefer plugs - the largest reefer capacity on any containership afloat today - Hamburg Sud's new Cap San class is 33m longer and 5m wider than the previous 7,100TEU Santa generation. The first two Cap San vessels were launched in May 2013 and a further 8 are due to come on-stream during 2014.

"We are living though a revolution," said Mr Thomas. "Our ships are being built bigger, to be slower and more fuel efficient. Ships built before 2008, which were designed mainly to be fast, are increasingly obsolete and those who stick to these vessels will be at a huge cost disadvantage."

But bigger ships put more pressure on port and supporting infrastructure and the strain is already showing in Latin America, especially Brazil. Mr Thomas told delegates that Brazilian port statistics for 2013 were "horrible," with berthing and handling delays reaching over 83,000 hours. "That's the equivalent of 7 ships sitting idle in the berth all year round in a Brazilian port. The inefficiency is fantastic, so we have to add more ships to the system to keep up the frequencies."

Carrier alliances are equally a response to cost pressures and this trend, too, is speeding up on Latin America West and East Coast trades, said Mr Thomas. "We see the comeback of consortia with many players getting together and sharing the same underlying system." What's slowing down, however, are the vessels. Slow steaming as a means to reduce fuel consumption is here to stay and, said Mr Thomas, has "one of the deepest impacts on our industry."

For the Latin reefer trades, he argued, "the key is to maintain an acceptable transit time within the environment of slow steaming. We must all adapt our logistics to this new reality." Average speed on Latin routes is now around 18 knots versus 21-22 knots previously, said Mr Thomas, although "it's unlikely we will see further reductions as there is an efficiency trade-off where the equation between less fuel and more ships doesn't work anymore."

Fellow keynote speaker Jose Lourenço Perottoni, Logistics Director for giant Brazilian food company brf, added: "if we had a 13 day transit time to Europe we would like it because it translates to cash. But more important to us is carrier accuracy in delivering on promises. If you say you will do it in 18 days you need to do it in 18 days." Mr. Perottoni said that brf, which ships 7,000 reefer container loads a month out of Brazil, has had to accept slow steaming as a "new normal" over the last 3-4 years.