Blog December 5, 2015

2015: The year in intermodal transport

By Nicola Byers

The year is drawing to an end, so in this edition of Intermodal Eye we look back at what a year it was for the intermodal industry.

The global container fleet continues to expand and lessors’ ownership of the fleet is growing more than ever, currently standing at just over 50%, as we wrote in March. 2014 was the first time since before the economic downturn that container lessors overtook shipping lines as the biggest owners of boxes, and the trend continues.

Manufacture of new containers continues to surge, and the majority are being bought by leasing companies. The surge in production volumes has also caused the price of a new ex-works container to fall from $2,100 to a five-year low of $1,900 over the course of 2014.

The falling price of new containers is tempting carriers to invest in new assets rather than buy second-hand, which is adding to excess capacity in the global fleet. Unfortunately for lessors, lease per diem rates are also declining. As the Eye wrote in May, the global container fleet needs to shrink if leasing rates and resale prices are to improve, but scrapping has remained relatively low.

The alternative to scrapping would be to sell units to be converted and reused. But as this blog explored in August, the average container produces nearly 1,000lb of hazardous waste before the structure can be re-used – and the awkward dimensions of containers often necessitates using multiple units in conversion projects. This points to a sad fact: while leasing rates are still low, there is no commercial incentive for operators to opt for more expensive, eco-friendly specifications. Container markets need to improve before ‘green’ box designs become the norm.

For tank containers, figures from the International Tank Container Organisation (ITCO) this summer showed the global tank container fleet continues to post net growth. So many tanks were manufactured in 2014 (some 48,200 tanks) that this year scrapping has ramped up in an effort to stave off overcapacity. Around 5,000 units were scrapped during the first half of 2015, a 500% increase over the period.

Operating companies increased their share of the global fleet by 20% between 2014 and 2015. However, the idle fleet also increased by 33% to 23,400 units this year, showing that the battle against overcapacity has not yet been won and markets remain patchy.

Major shippers have been placing more pressure than ever on safe and environmentally friendly transport of their products inside tank containers, as we discussed in February. Ditto the use of quality management systems and Safety and Quality Assessment Systems (SQAS) assessment, which a survey found would increase the likelihood of carriers winning contracts from major chemical companies. Now the pressure is on for intermodal terminals to demonstrate they aren’t the weak link in ‘green’ and efficient supply chains.

Where tank containers are concerned, operators can save themselves time, money and error by using semi-automated processes like MRI Intermodal’s tank asset management tool, which we covered in October. The system allows different elements in tank container supply chains to “speak” to one another and exchange information, which helps with planning and therefore efficiency.

But there remains a cloud on the horizon for the intermodal industry. This year, it was agreed that regulations mandating container weight verification prior to ocean carriage will be included in the IMO convention on the Safety of Lives at Sea (SOLAS). The amendments enter into force on July 1, 2016, which means the industry has less than eight months to be ready.

As the Eye discussed in July, there remains a margin for legal and contractual confusion regarding the new weight verification regulations, which must be resolved before the new SOLAS amendments are enacted. Ports, terminals and intermodal facilities fear it will fall to them to police container weighing in the transport chain, which could present problems.

In Europe and further afield, intermodal connections remain inefficient, roads remain congested and rail underutilised, particularly in the hinterlands of major ports. In September, Intermodal Eye looked at how technological innovation can be used to ease congestion, bottlenecks and transfers between modes of transport. As a technology provider, we’re keeping abreast of these developments (as demonstrated by this blog!) and are excited to see what opportunities 2016 brings.