Container lessors, during 2014, invested aggressively in growing their fleets, showing the world that it’s time to sit up and take notice. World Cargo News (WCN) has just published its annual review of global container fleets for 2014, which has revealed some of the key ways in which the industry is evolving.
Intermodal Eye this month takes a look at the changing face of container fleets:
1. The leased container fleet is increasing year-on-year (y-o-y)
WCN’s annual survey found that container lessors invested most in container acquisitions last year, causing the leased fleet to grow by a record 8% during 2014 (2% more than the previous year) to a calculated size of around 18.2m TEU. In contrast, the net growth of the overall global container fleet was just 6% last year.
2. Lessors now own the majority of the global box fleet
2014 was the first time since before the economic downturn that container lessors overtook shipping lines as the biggest owners of boxes. Lessors’ ownership today totals just over 50% of the global box fleet. As well as investing in new-built boxes, lessors have been expanding their fleet with second-hand assets through a flurry of sale and leaseback (SLB) deals.
3. 2014 saw record production of containers and lessors were the biggest buyers
Last year, container leasing companies bought 57% of the record-high 5.3m TEU manufactured in 2014, the highest global output since 2011 (when it was 3.4m TEU). The upticks in production and purchasing were spurred by stronger demand seen in the last half of 2014, which has been created by higher trade growth and the growing size of containerships. There was also a rise in the disposal of old equipment, so lots of orders were placed for replacements.
4. Weaker pricing is spurring production
The average price of a used container was around $750 in 2014, around half the price seen in 2011-12, due to the aging container fleet. The surge in production volumes last year caused the price of a new ex-works container to fall from $2,100 to $1,900 over the course of the 2014 – the lowest level seen since 2009.
5.The bad news is that leasing rates are also declining
Lease per diem rates declined over the course of 2014. For a new container, WCN said rates reached $0.50 per TEU placed on an initial five-year term. This would give an initial investment return of 9.6% – not much different to preceding years and still well below the long-term average.
6. Shipping lines’ dependence on container lessors is increasing…
… But the lines are also exploiting this heightened competition between the container lessors by dictating lower and lower rates. The many leasing companies in the market are essentially pitching for the same customers, so there’s not much else they can do but accept these lower rates and hope that their market share of the global container fleet shores them up.
All in all, the WCN survey found that it’s dog-eat-dog out there for container lessors. Thank goodness that market demand has held firm or the global fleet would be headed straight for excess capacity and (inevitably) operating loss.
The report suggests that the container leasing business could be due for a new spate of industry consolidation. This is indicated by the 80% purchase of Cronos Leasing (the world’s fifth largest container lessor by fleet size) by Bohai Leasing, owner of Seaco Global, the world’s fourth largest box lessor, which was concluded in January. This, as WCN observes, is the first box leasing merger of any kind since 2009-10. Surely, with the market as it is, there will be more to come as lessors decided that it’s better to stand united than fall divided.
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Survey information supplied by www.worldcargonews.com