GPA racks. Credit: Russ Bryant
With lines increasingly seeking cold chain solutions around the world, ports are today under pressure to deliver reefer capacity. Alex Hughes reports
Traditionally, the market for reefer plugs for maritime container terminals has been a very low cost and low priority one. However, with the expansion of the container market and growing concern about costs, it has become an issue for both the terminals themselves and the shipping lines that call there.Nicklas Pihl, Cavotec's Middle East sales manager (Ports and Maritime), explains to Port Strategy: "We are already seeing a trend towards higher quality systems for reefers, although this is more in respect of sockets than for the actual plugs themselves. Every new terminal we talk to reports that it is building a reefer station as a result of forecast increased market growth in this area," he notes.
As far as terminals are concerned, there is definitely competition among suppliers. Depending on the region, a terminal could choose between 10-20 manufacturers of plugs, with the market for sockets limited to just five or six companies.
"However, there are big differences in both the quality of the products being offered and also in the predicted lifetime of the different systems being offered. At Cavotec, we aim to compete at the high end of the market, where there are fewer competitors, but where quality is much more of an issue. Nevertheless, it has been a struggle to make some clients understand that higher quality and higher price actually represent savings in the longer term," emphasises Mr Pihl.
As for its own market penetration, Cavotec is today a major player in the Middle East, although Mr Pihl is the first to concede that in the world market it remains relatively small. In general, however, companies supplying both plugs and sockets tend to be global, rather than regional players.
In recent years, he adds, Chinese companies have begun entering this market offering much lower cost plugs. This he views as quite common practice with Chinese manufacturers across various industries, which he says always allows them to attract some clients whose interest is only in the upfront price.
"Many return to buying high quality systems once their maintenance costs start shooting through the roof; in most cases, cheaper plugs work out more expensive in the long run. At the same time, it should be pointed out that the cost of plugs themselves has fallen relatively in recent years. This is because the materials and production methods used to make them have themselves evolved, allowing higher quality materials to be incorporated at lower prices."
The development in plug and socket technology also means that most systems now available in the market are generally reliable across their expected life time. This, stresses Pihl, means that this is no longer an issue for many terminal operators.
"The actual working life of this equipment depends heavily on actual use and the manufacturing quality. Poor quality units may last only one year, while good quality units, with replacement parts, can last anything between 10 and 20 years, hence Cavotec's insistence on clients really taking into account life cycle costs during any purchase decision."
Mr Pihl also stresses that after sales service and spare parts provision have both become key industry issues and can make or break a sale. Needless to say, lower maintenance cost will always be a high priority for all terminals.
Cavotec's competitors from emerging economies do sometimes find it difficult to break out of their own home markets. Within India, for example, two domestic companies produce reefer plugs for maritime and port use: Power & Control and Dolphin. The former, which began trading in 1996, is the leading manufacturer, selling some 6,000 plugs annually to national customers. To date, the company has supplied Jawaharlal Nehru Port Trust, as well as the ports of Gujarat Pipavav, Mundra and Chennai, in addition to overseas customers in both Singapore and Sri Lanka.
Owner, Ashvin Negandhi characterises the current state of the domestic market as being relatively stable. He nevertheless emphasises that the reefer market in India is continuing to grow, which should generate ever greater numbers of plug sales in the future.
"When we bid for contracts to supply ports, we are in stiff competition with manufactures in Germany, Korea, Taiwan and China. Because of the tax burden in India, it is difficult for a relatively small company like mine to compete on price, especially since the major players in the market use mass production techniques, whereas we don't," says Mr Negandhi.
Significantly, Power & Control imports quality plastic from the US. The subsequent polycarbonate used to make the company's plugs means that they are able to withstand much higher temperatures, thereby ensuring that they remain a superior product.
"Although the technology behind cheaper Chinese plugs is similar to ours, they burn out very quickly, because the plastic they use is of an inferior quality," claims Mr Negandhi.
Conceding that technological advances in this sector have not been especially notable over the last 20 years, he nevertheless points out that his customers in India are more interested in the overall quality of the product that they are buying, rather than just looking at the price per se.
Quality notwithstanding, reefer plugs, which Power & Control guarantees for 12 months, shockingly tend not to last more than two years in operational service. Although modern reefer plugs on the whole are very reliable, they tend to get damaged by handling equipment long before they burn out, says Mr Negandhi, hence the high rate of turnover.
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