The market for reefer monitoring is larger than thought, due to the sun setting on Maersk Line’s 3G hardware.
The race to sign up the top reefer container carriers to a remote reefer monitoring system is well and truly on. Looking at the total market for reefer monitoring, Orbcomm and others estimate that there are around 2.4M to 2.5M reefer containers (not TEU) in the world today. Of that number, 400,000 are controlled by Maersk Line, including the fleet operated by its subsidiary Hamburg Süd.
Over the last few months, reefer monitoring suppliers have been focused on signing up lines that have not yet committed to a technology. Of the top 20 carriers, six names control just over half the total reefer fleet – Maersk Line, CMA CGM, ONE, MSC, Hamburg Süd and HapagLloyd. Maersk and Hamburg Süd are using the system from AT&T and partners (including Orbcomm), and Hapag Lloyd has announced that it will use Globe Tracker. CMA CGM and MSC are both investors in Traxens, but have not made it clear whether they will use its technology for reefer container monitoring.
Earlier this year, Orbcomm announced an order of 20,000 devices for an OEM that supports one of the top shipping companies. CEO Marc Eisenberg said recently that this has been extended to a full fleet-wide deployment on a 150,000-container fleet using LTE technology, the bulk of which will be installed in 2020. The value of the hardware for Orbcomm is in the US$4M-6M range in the second half of 2019, rising to US$4M6M per quarter in 2020.
The Maersk contract is also back up for grabs, apparently. Eisenberg said Orbcomm’s deal with Maersk through AT&T will not be extended on AT&T’s legacy 3G platform, and will expire at the end of 2019.
Maersk Line’s hardware uses 3G communications from AT&T. The US telecoms giant has issued a clear directive that its customers should be planning to move “as soon as possible” to 5G LTE technology. “We currently plan to end service on our 3G wireless networks in February 2022,” stated AT&T.
For Orbcomm, the Maersk contract is an unusual one. Orbcomm actually inherited the deal when it acquired WAM Technologies, and it supplies and supports the protocols for remote two-way communication with different types of reefer controllers. The contract for Orbcomm is worth around US$3M per year.
For historical reasons, Orbcomm recognises this revenue on a subscription basis, and the reefer containers are therefore counted as 400,000 “subscriber units” out of Orbcomm’s total 2.51M subscriber base (at the end of June 2019). However, Orbcomm is not actually providing hardware or connectivity directly to Maersk. Eisenberg said it does not typically price engineering and support services on a per-unit basis, but inherited this arrangement when it acquired WAM Technologies.
As a subcontractor, Orbcomm’s share of the revenue per container is lower than it receives for other devices it sells directly, and this lowers Orbcomm’s ARPU (average revenue per user), which is a key metric watched by market analysts. Eisenberg said Orbcomm prefers the model where it sells directly to transport carriers such as shipping lines and, for its trucking products, fleet owners. In fact, he said, “you could do better on a fleet of 40,000 or 50,000 operating solo than you will just kind of getting these small scraps that we’re kind of getting out of this AT&T deal”.
Whatever Maersk does, it is not the only carrier in the market at the moment. Eisenberg said lines with another 300,000 to 400,000 reefers are also looking. Orbcomm is bidding on these projects, “and we’re closing in on them”, he added. The fleet sizes involved range from 20,000 to 150,000 reefers.
Sources involved in the reefer monitoring market say that some of the projects announced are for 10,000 or so reefers initially, but, according to Eisenberg, the numbers can actually grow very quickly. A customer might start out with a pilot project but “the realisation is that unless you deploy all of these devices, you don’t really change your operations,” he said. “So there’s all this pressure to get it done,” he stressed. Referring to some installations, Eisenberg said Orbcomm has been asked to accelerate the roll-out “as quickly as humanly possible”.
That urgency is also reflected in changes within the leasing sector. Some leasing executives that WorldCargo News has canvassed at Intermodal Europe exhibitions have raised a relatively long list of issues with regard to installing monitoring devices on leased containers, but today it seems there is a willingness to solve these problems, or an urgency to push on regardless.
SeaCube recently announced it will bundle the cost of telematics equipment into the reefer leasing rate, and Seaco is now doing the same. Commenting to WorldCargo News, John Bannister Seaco vice president, Tanks and Reefer, said: “Seaco recognises the vital importance of remote monitoring on all kinds of container, and that importance will only grow as we go forward. We’ve established relationships and dialogue with several of the leading suppliers of such equipment to understand their offering and the value of the offer to our mutual customers. Much of our world-leading reefer fleet is being equipped with monitoring devices, either while on lease, or at point of manufacture – and this can be included in the per diem over the term of the lease, or simply done at the customers’ cost.”
Bannister said how the hardware costs are allocated when the containers are leased ultimately depends how the deal is structured. Hardware could be supplied as part of a contract for monitoring platform, owned by the lessee directly, or supplied by the leasing company with the cost bundled into the per diem.
What happens to the hardware when the lease expires is an issue, but again Seaco is willing to be flexible. “Tracking and monitoring requirements are rapidly changing, both in the information being asked for and the hardware being required to perform the tasks,” said Bannister. “With the speed of change as it is now, if reefer units are going out on lease for five years and possibly extended for another three to five years, there is a high chance the modems will have been superseded by the time they come back, if they have not already been upgraded in-service. So, when the reefers come back to us in depot, they may be left on or removed and returned back to the lines, depending on who owns them.”