Container production surges

There’s a buoyant outlook for container production based on the findings of a new report by global shipping consultancy Drewry which predicts that production will exceed 3.5 million TEUs for the period 2017 to 2020. These are the most consistently strong figures in over a decade, according to the analyst.

“Given that buyers had cut back too much on their purchases in 2016, the latest surge in production – up by 80% in 2017 – has concentrated on standard equipment and particularly the 40-foot high cube,” said Drewry’s lead analyst for container equipment, Andrew Foxcroft. “Drewry forecasts that 75% of capacity built in the second half of this decade will be of this type.”

He noted that transport operators, and especially leasing companies, had been vigorously expanding their container fleets as the outlook for world trade was looking more promising and growth in ship capacity was slowing down. The container fleet grew by 3.7% in 2017 to catch up with demand.

“This fleet expansion is still being driven by the leasing sector,” said Foxcroft. “Shipping lines have focused their investment on ships rather than boxes in recent years, while the lease sector – invigorated by a series of mergers – is seeing the major players jockeying for position.”

He added that a further improvement in container equipment lease rates since their recovery last year would likely be limited which meant that cash investment returns were expected to remain relatively weak.

While long-term lease rates for standard dry equipment leapt by over 50% in 2017, newbuild prices rose by a similar margin, limiting cash investment returns to around 9%.

“With little change in lease rates anticipated over the next few years, investment returns are forecast to remain under pressure,” said Foxcroft. “Although we have seen returns edge up to nearer 10% in the first half of this year, we do not expect these levels to be sustained given recent build-up of factory stocks.”

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