Long regarded as a niche sector with low volumes, pharmaceutical products are starting to arouse the interest of shipping companies, in search of high-potential… and profitable segments. And that's good news, as there is high demand from the shippers too.
There are two phenomena that are now coming together to contribute to the development of the maritime transport of pharmaceutical products. On the one hand, and above all, some maritime carriers are in difficulty, and are therefore looking for buoyant and profitable segments. On the other, there are shippers who seek to reduce their transport costs and display better environmental performance.
"The maritime industry is going through a profound crisis, which is partly self-inflicted. Overcapacity is in reality being perpetuated by shipowners' strategies", was the opinion of Paul Tourret, director of Isemar, at the opening of the maritime conference that took place in Tours last November as part of TIPS, an annual seminar organized by Pharma Logistics Club. The creation of alliances has been unable to make a significant impact on freight rates and the question of the profitability of companies has come sharply to the forefront, against the backdrop of the trade war.
A dynamic reefer market
In this context, the “Reefer” segment is doing rather better. "It is a dynamic market, aided by globalization and the emergence of middle classes worldwide which consume more and more fresh products", analyzes Paul Tourret. Profitability is being reached, with "freight rates that are doing well and are increasing".
Shipping companies are under no misapprehensions here. The main players are all positioned in this market segment, and although the reefer container fleet is growing year after year, undercapacity is prevalent at certain times or on certain lines. Admittedly, reefer development is largely driven by the food industry. However, pharmaceutical products, long neglected by volume-hungry shipping companies, are also gaining ground, driven by the growth in demand.
Feedback: the Sanofi case study
Sophie Marchand, Head of Distribution Support at Sanofi Pasteur, gave a particularly enlightening testimony to this trend during the 2019 TIPS. Since 2011, the group has put an end to “all air” by transporting a part of the vaccines by sea. "It's an interesting alternative in terms of costs and the environment," points out Sophie Marchand. The use of reefer containers also makes for a pretty safe means of transport, "if we put conditions in place that ensure that the cold chain is controlled from end-to-end", specifies Sophie Marchand. This criterion is all the more essential since, in the context of marketing authorization regulations, no temperature deviation is tolerated.
To implement this approach, Sanofi first carried out a meticulous risk analysis. "Given the size of the containers, we decided to only ship our vaccines to subsidiaries or partners who have storage possibilities. It was also necessary to take into account in the supply chain the duration of transport, which is obviously much longer than by air since it takes at least 15 days to reach the United States or Canada and up to a duration of 30 days or more on destinations such as China or Mexico", specifies Sophie Marchand.
Rating route by route
Sanofi has also worked on the management of breaking bulk, when the reefer is disconnected, for example for boarding or unloading. Two solutions were found: "We have developed over-packaging for our pallets, and we have implemented 100% monitoring of all our shipments," says Sophie Marchand.
The group then began a route-by-route rating process, in collaboration with its freight forwarders. “This stage is a bit long, but it allows us to define our processes. We always do a trial dispatch to start with, or sometimes even two. If the results are good, we send three reefers on three different ships. We analyze the temperature data and finalize the "technical agreement", explains the Sanofi manager. To date, 7 destinations have qualified: Canada, China, Malaysia, South Africa, Japan, the United States and Mexico. Brazil could join them in 2020.
Significant constraints concerning quality
However, it would seem that the requirements imposed by shippers are being relaxed on the question of the age of reefer containers. "We initially set a limit of 3 years, which we finally extended, and it has now reached 7-8 years", says Sophie Marchand.
A strategy approved by Hristo Petkov, Global Head of Pharmaceuticals of the shipping company Maersk: "Admittedly, the insulation of the container changes over time, but most of the degradation occurs during the first three years. A container, up to 12 years old, is perfectly suited for transporting pharmaceutical products".
As for CMA CGM, it strives to select containers less than 5 years old for pharmaceutical products. But over and above the age criterion, shipping companies are particularly attentive to the verification of containers before delivery to the customer.
The handlers are also making efforts to support the development of this market and meet its requirements. "In 2020, we are aiming for a delay of 30 minutes between the truck and the reefer zone and 1 hour between disconnecting in the reefer zone and loading on board," said Hugues Houzé de l'Aulnoit, general manager of the Med Europe Terminal in Marseille. In 2018, the company also signed a “Reefer Quality Charter”, which notably guarantees permanent service of the reefer activity, even in the event of social unrest.
For shipping companies, reefer logistics go far beyond the quality of containers. “First of all, there is risk management, which involves an analysis of routes, limitation of the number of handling points, a careful selection of subcontractors, transparency of data and close attention to the product”, explains Stéphane Nielsen, Senior Reefer Manager at CMA CGM.
In addition, shipping companies must contend with the current shortage of reefers which, according to CMA CGM management, will only worsen. In fact, demand is constantly increasing, on the one hand because new shippers are adopting maritime transport, as has been shown in the case of Sanofi, and on the other hand because goods previously transported by refrigerated ships are moving over, more and more to container transport. To this must be added the normal renewal requirements, but also peaks in demand that are linked to short-term phenomena. For example: swine fever which has been raging in China for 2 years now has led to an increase in imports.
In total, the volume of perishable goods transported by sea should reach 130 million tonnes in 2020, compared to 106 million in 2016. Conventional vessels will represent only 21 Mt, (-19% compared to 2015), while at the same time, the volume transported by refrigerated containers will have increased by 81% to reach 109 million tonnes (i.e. 9.5 million TEUs). "In total, we estimate the need for reefer containers at 371,000 per year, while supply capacity stands at 190,000," says Stéphane Nielsen.
Some good news for the pharmaceutical sector: their products are generally able to bear a higher transport cost than other categories of perishable products, and this could ensure access to availabilities. Nevertheless, shipping companies insist on the need to optimize the use of resources by reducing container immobilization times.
On average, a reefer container is used on 4 trips per year. “It is essential to reduce this rotation time. On a Fos-Shanghai journey, a container is immobilized during 78 days, for a transit time of 40 days. And this is the same situation on a Conakry voyage, for a transit time of only 19 days,” points out Stéphane Nielsen. In addition to pure routing, there is also the time required to position / reposition the containers, but also the waiting and customs clearance times, which are particularly long in certain ports. Suffice to say that optimization will be complex, given the number of actors involved ...