Numerous industrial sectors have suffered terribly during the global COVID-19 pandemic. However, tank container operators have kept their heads above water, even if not swimming at full pelt.
There was a large degree of disruption in early spring when it became clearer that drastic action was needed to limit the spread of the virus.
The tank container business not only uses specialist equipment, it relies on a balance of trade flows so as to optimise its deployment. Yet when China first went into a draconian lockdown this hit many raw material and feedstock manufacturers at that end of the supply chain, which had a knock-on effect in Europe and the Americas. This in turn impacted demand, again cycling from Asia to the Americas. All this disruption led to erratic volumes and delays in discharging tanks, which then led to tank shortages in some regions.
But this was relatively short-lived and by late spring, early summer a kind normalcy started to return to the market. This was helped by strong demand for shipping ingredients used in hand sanitiser which saw an explosion in both demand and supply, offsetting some of the falling demand from other users, such as automotive and plastics manufacturers. Other sectors witnessed relatively normal levels of demand, such as chemicals used in the water treatment industry and foodstuffs.
By the third quarter, Stolt Tank Containers (STC), the largest tank operator, actually managed to post increased operating profit of US$17.5 million, up from $13 million in the second quarter. This was despite a 10% reduction in transportation revenue as this was more than offset by lower ocean freight and trucking expenses, as well as lower repositioning costs.
At the same time, the global operator sounded a warning that many of its major customers do not expect 2019 production levels to return until sometime in 2021, with the automotive and construction sectors projected to suffer the most severe impact and prolonged recovery.
Hamburg-based Hoyer, the second biggest operator, is also cautious. The group’s investment budget originally planned for 2020 was €146 million. However, as soon as the pandemic took hold this was revised with expenditure focused on essential strategic projects, including investments in a dangerous goods terminal, buildings and technical installations, further expansion of its ‘Smart Logistics’ concept, information technology, international business acquisitions and joint ventures.
Talking of technology, tank operators report that the pandemic and associated lockdowns are accelerating the drive towards digitalisation. Both operators and their cargo owner customers have been able to see clearly the benefits of telematics as they can read cargo and sensor data on their computers instead of being physically present alongside the tank container at various points along its journey.
Moreover, as customers began working from homes, many tank operators experienced a sharp increase in those customers looking to connect and make transactions digitally. So, just as household consumers have been prompted to use their computers to order the week’s groceries and, crucially, track and trace progress to their door, so bulk liquid shippers are likely to feel more comfortable about dealing with their tank operator suppliers on a remote basis; perhaps a faster than expected payback for those tank container owners that invested heavily in a digital infrastructure.
Quite what the pandemic means for the tank leasing companies is less clear to discern as few of them are obliged to report quarterly results. Triton International, which controls a fleet of more than 11,000 tanks among its total container fleet of 3.6 million, noted that trade volumes rebounded sharply during the third quarter of this year and the lessor experienced a surge of lease activity across its entire fleet.
However, one school of thought is that the leasing part of the tank sector could see a renewed effort to consolidate. Following years of expansion fuelled by cheap finance, the tank business became fiercely competitive with a number of leasing start-ups joining the fray.
This could change as smaller customers, such as some freight forwarders, face renewed difficulties from depressed demand come the winter and follow-on COVID-19 waves in core markets like Europe. The more vulnerable ones might start to see advantages in joining a larger competitor with deeper pockets. The same could also be true of some smaller tank operators.
In short, the tank container sector was probably just as fearful at the start of the pandemic as most other businesses. But as things transpired the industry has so far coped surprisingly well. How things will play out going into 2021 is difficult to predict; uncertainty still reigns and caution remains the watchword.