Oct. 20 (Bloomberg) -- Container lines struggling to make money hauling Chinese-made goods to the U.S. are experiencing a surge in lucrative shipments of meat, fruits and vegetables in the other direction.
A.P. Moeller-Maersk A/S and Neptune Orient Lines Ltd.’s APL unit have led a 46 percent jump in refrigerated-container shipments to China from the U.S. this year, according to Piers data, as higher wages and quality concerns stoke demand for imported food. The need for specialized containers, known as reefers, means rates are about four times higher than those for carrying a standard box from Shanghai to Los Angeles.
“There’s an opportunity in the reefer market,” said Tim Smith, the North Asia head at Maersk Line, the world’s largest container-ship operator. In China, “the level of disposable incomes has increased a lot, so we think they’ll want more high-quality foods and perishable products,” he said.
Copenhagen-based Maersk’s shipping arm plans to invest more than $1 billion in refrigerated containers over two years, Smith said by e-mail. Revenue from chilled cargo may rise more than 10 percent next year after “major” growth this year, he said.
Shipping lines use refrigeration equipment and gases including oxygen, carbon dioxide and nitrogen to keep food fresh during sea voyages that can be longer than two weeks. That’s allowing them to carry goods that once could only be moved by quicker and more costly air cargo. APL, Orient Overseas (International) Ltd. and other lines also offer real-time temperature-tracking systems to assure shippers about quality.
“We basically put the fruits to sleep, extending their shelf life,” said Eric Eng, APL’s vice president for global reefer trade. “For growers, it means new markets in countries far away.”
The shipping line’s reefer sales have grown more than 10 percent annually for the past eight years and the company expects that to continue, he said, without elaborating.
Taiwan-based Evergreen Marine Corp. ordered 4,000 refrigerated containers in August from a United Technologies Corp. unit. Port operator China Merchants Holdings (International) Co. and partner Americold are also investing $400 million over five years building up a cold-chain distribution network in China.
Shanghai Great Harvest International Co., which distributes fruit across China, pays about $6,000 to ship a forty-foot container of cherries from Seattle to Hong Kong, said Chief Executive Officer John Wang. Cherries are the fastest-growing product in terms of demand for the wholesaler, which also imports grapes, apples and other fruits, he said.
“Chinese people are getting richer and they don’t worry about three meals a day anymore,” he said. “They are changing their appetites and they want fresh food.”
The use of containers for perishable goods has boosted the availability of imported fruit in China, said Ye Jianqing, 29, who runs Cidoko Fruit store in Shanghai’s People’s Square district. Imported produce generally costs about 50 percent more than local goods, said the fruit seller, who offers pomelos from Thailand at 34 yuan ($5) apiece and U.S. grapes for 30 yuan per 500 grams.
“Chinese consumers used to feel that buying imported fruit was extravagant,” he said. “But as Shanghai becomes more developed, the standard of living is higher and consumers have changed their thinking.”
Food-safety scares have also fueled the trend. In May, watermelons in eastern Jiangsu province exploded in fields, possibly because of a growth-promoting chemical and sudden rainfall after a drought, the official Xinhua News Agency said at the time.
Container Line Earnings
Container lines’ earnings have tumbled this year as plunging rates for carrying goods from China outweigh rising demand for imports. NOL dropped 3.6 percent to S$1.85 in Singapore trading today. The shipping line has declined 50 percent this year. Orient Overseas has tumbled 57 percent in Hong Kong and Maersk has fallen about 30 percent in Copenhagen.
The boom in China-U.S. reefer traffic “will not be sufficient to reverse the overall decline for container-shipping lines,” said Tan Hua Joo, a Singapore-based analyst at shipping-data provider Alphaliner. “The carriers’ performance this year will be driven by the weak conditions on the Far East-Europe and Far East-North America trades.”
The U.S. imported the equivalent of 5.6 million twenty-foot containers from China in the first eight months, according to Piers, because of demand for sneakers, auto parts and toys made in Chinese factories. The tally, which included 70,730 reefer shipments, was little changed from last year.
By contrast, 53,381 twenty-foot reefers were carried on U.S.-China routes in the period, with meat and frozen fish accounting for about 50 percent, according to Piers, the trade-data arm of London-based UBM Plc. The number of shipments in traditional boxes on the route rose 8.9 percent to 1.6 million.
Prices for new reefers are “staying relatively high” because of rising demand and a shortage of capacity, while the cost of standard units is declining, said Andrew Foxcroft, who writes an annual cargo-box report for Drewry Shipping Consultants Ltd.
Lines may order as many as 140,000 new refrigerated units this year, compared with about 100,000 last year, Foxcroft said. The global number of refrigerated containers will likely reach 1.06 million by the end of the year, he said. The total fleet, which is predominately standard units, totals about 31 million.
The use of reefers may continue rising as Chinese shoppers, like Wang Lin, a 32-year-old mother living in Shanghai, seek out more cherries, blueberries and oranges from the U.S.
“It was dull only having Chinese-grown apples, pears or tangerines every day,” Wang said. “I hope to eat many more different types of fruits in future.”
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