Authors: Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom
Cold chain technology has allowed ports to play an active role within these supply chains, particularly with refrigerated containers (reefers).
1. Cold Chain Logistics
Developments in reefer transportation and logistics have facilitated the growth in the global demand for cold chain products. Although the reefer is a homogeneous transportation product, the markets it services are highly heterogeneous, ranging from agricultural goods, to pharmaceuticals and chemicals, and even fresh flowers.
The cold chain involves the transportation of temperature-sensitive products along a supply chain through thermal and refrigerated packaging methods and logistical planning to protect the integrity of these shipments. There are several means by which cold chain products can be transported, including refrigerated trucks and railcars, refrigerated cargo ships, reefers, and air cargo.
While global supply chains are relatively modern expansions in the transportation industry, the refrigerated movement of temperature-sensitive goods is a practice that dates back to 1797, when British fishermen used natural ice and salt to preserve their fish stockpiles while at sea. By the 19th century, an ice trade emerged and allowed for rudimentary forms of refrigeration. During the winter in the northeast of the United States and Norway, ice was cut out of freshwater ponds into large blocks hauled into ice houses for storage. Then, ice blocs were distributed to local or regional markets through wagons, rail, and barges. This allowed food distribution from rural areas to urban consumer markets, namely fruits, vegetables, and dairy products that could be effectively stored using ice refrigerated wagons and storage facilities. Since wood chips were used as a form of insulation during storage and transport, the ice trade benefited from the availability of this by-product in wood extraction regions of New England. By the mid-19th century, an active international ice trade emerged, where ice was shipped from New England to the Caribbean, Latin America, and even to India. With this growing ice trade, ports saw their first cold storage facilities and the setting of cold chains.
By the early 20th century, the invention of refrigeration allowed for local, year-round production of ice. This marked the downfall of the conventional ice trade with the construction of the first refrigerated ships in the 1880s, where a section of the cargo hold was refrigerated. At that time, France was starting to receive large shipments of frozen meat and mutton carcasses from South America, while Great Britain imported frozen beef from Australia and pork and other meat from New Zealand. This process was incited by a shortage of meat production in Europe and substantial surpluses in developing countries. By 1910, 600,000 tons of frozen meat were being brought into Great Britain alone.
In addition to frozen meat and fish, refrigeration allowed for the setting up of tropical fruit trades that required specialized reefer ships designed for that sole purpose. The first reefer ship for the banana trade was introduced in 1902 by the United Food Company to carry tropical fruits from Central America to the United States. This enabled the banana to move from being an exotic fruit that had a small market because it arrived too ripe, to one of the world’s most consumed fruits and the fifth most traded agricultural commodity. A whole range of handling procedures and equipment has been developed, making the banana a core driver of cold chain logistics. Its impacts on the reefer industry were monumental and incited the construction of cold storage facilities near ports.
Banana trading multinationals were initially fully vertically integrated as they owned plantations, port terminals, reefer ships, ripening centers, and cold storage facilities. An important dimension of the banana trade concerns its containerization. In the past, tropical fruits were predominantly transported in specifically designed reefer ships. The last quarter of a century has seen rapid containerization of the banana trade, which now accounts for 20% of all maritime reefer usage. For instance, about 60% of all the bananas imported into the United States are carried in refrigerated containers. In some markets, such as the Caribbean, the diffusion of container shipping services was accelerated by the potential offered by reefer trades. Accordingly, the specialized reefer ship was gradually being phased out to be replaced by specialized containerships, most with their own cranes, designed to carry refrigerated containers. Large fruit companies such as Dole, Chiquita, and DelMonte are transitioning towards reefer-only operations, which incites the creation of large reefer terminals able to handle such volumes. Additionally, conventional container shipping lines offer reefer capacity on their ships, capturing a growing share of the banana trade.
Globalization and more reliable cold chains can significantly impact supply chains by expanding available options in terms of locations and processes. This results in an increase in the quantity and quality of products available on markets as well as lower costs.
2. Refrigerated Containers
A. The reefer market
Refrigerated containers (reefers) account for a growing share of the refrigerated cargo transported around the world. While in 1980, 33% of the refrigerated transport capacity in maritime shipping was containerized, this share rapidly climbed to 82% in 2017. Two major factors account for the growth in the transportation of refrigerated containers:
- The rise in global incomes, particularly in developing economies, is accompanied by a nutritional transition. This drives the consumption of imported fresh food.
- The growing availability of refrigerated containers and equipment and cold chain techniques allow for the transport of temperature-sensitive goods in better conditions and over longer distances.
The structure of global maritime shipping is thus adapting to service the reefer trade, implying a shift away from specialized ports, or specialized terminals within ports, to standard container terminals. The reefer has become a common temperature-controlled transport unit used to ensure load integrity since it can accommodate a wide range of temperature settings and a wide range of temperature-sensitive products. It is also a versatile unit able to carry around 20 to 25 tons of refrigerated or temperature-sensitive cargo. It is fully compatible with the global intermodal transport system, which implies a high level of accessibility to markets worldwide. A wide variety of cargoes can be carried in reefers. On occasion, a reefer is used to carry a regular container cargo load if repositioned or if there is a shortage of standard containers.
About 2.9 million TEUs of reefers were being used by 2018, representing about 5% of the global ISO container capacity. To compare, a regular 40-foot container costs around $5,000, while a reefer of the same size costs in the range of $30,000. The cost difference is attributed to insulation and the refrigeration unit that keeps the temperature constant. This implies that a reefer has less volume than a regular container of the same size. While a regular 40-foot high cube container can accommodate a volume of 76 cubic meters, a reefer of the same size handles 67 cubic meters (12% less). This shortcoming is compensated by the heavier loads that are usually carried in reefers. From a manufacturing standpoint, all the world’s reefers are made in China. In 2015, MCI, a subsidiary of Maersk, began the operation of a new reefer manufacturing plant in San Antonio, Chile. The main locational rationale was that manufacturing reefers next to major export areas of refrigerated cargoes (fruits such as oranges and grapes) would provide a free first move. However, the plant was closed in 2018, mostly due to high production costs.
The higher costs of the reefer, its energy consumption, and the additional equipment and monitoring required, involve higher shipping rates. The rates vary according to the value of the temperature-sensitive cargo being carried as well as if it is frozen (lower rate) or fresh (higher rate). A reefer must be used four to six times per year as a revenue-generating movement to be profitable. Due to the specific trades they service, reefers are often repositioned empty or used as regular containers with their power supply turned off. As such, they are labeled as non-operating reefers.
The reefer trade is a full container load (FCL) and point-to-point only. Unlike the regular container trade, there is no consolidation or deconsolidation function performed in reefer transportation since that would increase the risk of damaging what is being carried. Deconsolidation usually occurs either when the contents of reefers are transloaded into domestic reefers or at the distribution center when orders are assembled for customers (particularly for groceries). Under specific circumstances, reefers can even be used as refrigerated storage units.
B. Technical considerations
Reefer operations are subject to several crucial technical considerations. Proper air circulation must be ensured, meaning that reefers have gratings on the floor and that a clearance of about 15 cm must be kept between the cargo and the ceiling. Cold air coming out of the refrigeration unit flows through the bottom part of the reefer and as it warms up, it climbs towards the ceiling to flow back to the refrigeration unit, usually 0.5 °C to 3 °C warmer. The heat can be the outcome of ambient temperature permeating into the reefer (this is particularly the case when the ambient temperature is high) as well as the cooling of the cargo if it was loaded in at a warmer temperature than maintained in the reefer. All reefers are painted white to increase the albedo (share of the incident light being reflected; high albedo implies less solar energy absorbed by the surface). For instance, a low albedo container can have its internal temperature increase to 50 °C when the external temperature reaches 25 °C on a sunny day. In comparison, a high albedo container sees its internal temperature increase to only 38 °C under the same conditions.
The refrigeration unit of a reefer requires an electric power source during transportation and at a container yard. For the road transport of a reefer, either a clip-on generator (called Genset; it attaches to the upper front end of a reefer) or an underslung generator (it attaches under a container chassis) are used. For modes such as maritime, and rail that can carry multiple containers, the capacity of the power system determines the number of reefers that can be carried. Regular containerships have 10% to 20% of their slots adapted to carry reefers. Some ships have up to 25% of their slots dedicated to servicing routes with a higher intensity of refrigerated cargo (e.g. Latin American exports). The power is directly provided by the ship’s generator. For rail movements, diesel generators are used to provide power to about 8 reefer containers. These Genset units have the same dimensions as a 40-foot container and can use the same intermodal equipment as intermodal containers. A common loadout for unit trains is to have two stacked Genset units to power a group of 16 reefers. Clip-on generators are commonly used for smaller reefer loads or shorter distances. It is important to underline that the refrigeration units are designed to maintain the temperature within a prefixed range, not to cool it down. This means that the shipment must be brought to the required temperature before being loaded into a reefer, which requires specialized warehousing and loading/unloading facilities.
Another technical consideration concerns monitoring the condition of reefers and their cargoes. A variety of sensors are included in the new generation of smart reefers monitoring temperature and humidity conditions and using the cooling plant more efficiently. This enables improvement of the reliability of temperature control and extends the autonomy of the reefer. Still, vessel crews and terminal personnel need to physically monitor reefer conditions, which is time-consuming and subject to errors. An emerging trend and standard involve equipping reefers with remote management systems to monitor the temperature and humidity. These units are equipped with a GPS and a wireless communication device on the reefer controller unit to provide regular updates to a ship’s onboard information systems to assess any issue that could occur along the cold chain. Thus, the reefer becomes a component of the Internet of Things (IoT), allowing it to be queried and monitored at any given time and location.
Humidity can become an issue for refrigerated and standard containers during transport time as their cargo can be damaged by condensation. The most common forms of moisture damage include corrosion, the caking of powders, the peeling of labels, mold, microorganisms, the warping of cardboard, and the deterioration of packaging. Containers are waterproof, but not hermetic, leading to exchanges between their cargo hold and with the ambient air. The main source of humidity is related to stuffing the container in a humid environment and carrying goods with high moisture content. Humidity levels of around 40% can favor corrosion on containers, impacting their durability and maintenance. Humidity levels in the range of 60% to 70% can incite the growth of molds and microorganisms on agricultural commodities, fabrics, and leather. High humidity levels can also weaken and damage cardboard packaging, which can lead to damage to the cargo content, such as electronics. Estimates place that about 10% of the cargo carried in containers receives a level of humidity damage. If the ambient temperature drops by a factor of 5oC over a short period of time (e.g. a cold front or high differences between day and night temperatures), humidity inside the container can condense on the container’s interior and its cargo. With the repetition of this cycle, the risk and extent of damage increase. Using desiccants to absorb extra humidity inside containers is a common mitigation strategy.
3. Reefer Terminal Facilities
The growth in cold chain logistics has increasingly required transport terminals such as ports to dedicate a part of their storage yards to reefers. This accounts for between 1% and 5% of the total terminal capacity but can be higher for transshipment hubs or terminals in areas with an important reefer trade, such as the Philadelphia region and Antwerp. Around the world, large numbers of reefer slots are observed in three primary contexts:
- Commercial gateways where the reefer trade involves the imports of food products for the domestic market. The level of reefer activity is usually related to market size and the level of economic development. This mainly characterizes European, Chinese, and North American ports with extensive and complex food distribution systems. This can lead to having concentrated levels of reefer activity, such as for the port of St. Petersburg since it acts as the main gateway for refrigerated goods for the whole Russian economy.
- Transshipment hubs connecting regional reefer trades such as Singapore, Dubai, Busan, and Algeciras. The purpose of these hubs is to transfer reefers between maritime shipping routes quickly. This takes place at transshipment hubs that have the best connectivity and level of performance.
- Reefer export platforms related to fruit and vegetable trades such as from South Africa, Brazil, Ecuador, Chile, and Costa Rica. The high involvement of a port’s hinterland in trades related to perishables is associated with a higher than average number of reefer plugs.
Because of the nature of their cargo, reefers impose particular requirements on port infrastructure, namely in terms of storage space, energy supply, and handling processes. Reefer storage requirements involve having an adjacent power outlet, known as a reefer plug. The task is labor-intensive, as each container must be manually plugged and unplugged. The temperature has to be regularly monitored as it is the responsibility of the terminal operator to ensure that reefers keep their temperature within preset ranges. With information technologies, monitoring reefers in a terminal is being automated with essential information, such as temperature and its fluctuation, humidity, and refrigeration unit power usage collected and stored. Any unusual event, such as a rise in internal temperature, can be flagged for immediate intervention.
In a terminal, reefer stacking areas usually rely on three approaches:
- Wheeled storage. A conventional method where reefers are placed on chassis that are moved to a parking area where each parking slot has an electric reefer plug. This tends to be associated with lower operating expenses but consumes more space. Only regular trucks are required for terminal operations.
- Stacked storage. Using yard equipment such as reachstackers to stack reefers up to three in height. It allows for higher densities but requires more equipment and labor.
- Rack storage. An emerging method taking place at high throughput terminals where land can be scarce. The reefers are stored and stacked into rack systems that can hold between 20 and 30 reefers. Reefer racks have a common power supply and each reefer can be accessed and monitored through platforms. Such a storage system has higher capital costs but requires a reduced terminal footprint; 4 to 6 times less storage space than wheeled storage.
Even if reefers involve higher terminal costs, they are very profitable due to the high value of transported commodities. Depending on the intensity of reefer use, reefer activities can account for between 20% and 35% of the total energy consumption of a container terminal. Under specific circumstances, reefers can even be used as refrigerated storage units when there is not enough refrigerated warehousing capacity or when the reefer only stays for a short duration. As global incomes keep improving, the demand for goods such as fresh meat, fruits, and vegetables will continue to rise, and so will the demand for reefers and port facilities to handle them.
Related Topics
References
- Arduino, G., Carrillo Murillo, D. and F. Parola (2015) “Refrigerated container versus bulk: evidence from the banana cold chain”, Maritime Policy and Management, 42(3), pp. 228–245.
- Behdani, B., Y. Fan and Bloemhof, J. (2019) “Cool chain and temperature-controlled transport: An overview of concepts, challenges, and technologies”. In R. Accorsi & R. Manzini (eds), Sustainable Food Supply Chains, Cambridge, MA: Academic Press, pp. 167–183.
- Lennersfors, T.T. and P. Birch (2019) Snow in the Tropics: A History of the Independent Reefer Operators, Leiden: Brill Publishers.
- Rodrigue, J-P and Notteboom, T. (2015) “Looking inside the box: evidence from the containerization of commodities and the cold chain”, Maritime Policy & Management, 42(3), pp. 207–227.