Competitive pressures are having an adverse effect on lease rates following a rise in ownership of container equipment by lessors according to a report by Drewry.
The container leasing companies’ expansion has coincided with ocean carriers cutting back on new purchasing and selling older inventory for leaseback.
In 2016, the lease sector expanded by 7% and took 54% of deliveries as shipping lines cut back.
The shipping lines’ ‘weaker commitment’ could be a result of fiscal problems, causing high-profile mergers and the bankruptcy of Hanjin, thus undermining box shipping confidence, the analysts said.
Andrew Foxcroft, Drewry’s lead analyst for container equipment said: “Dry freight per diems are expected to remain under pressure as the top leasing firms vie for market share, while the underlying initial cash investment return (ICIR) is expected to remain flat.
“Similarly, we anticipate reefer rate levels to hold close to their recent level. As in the dry freight sector, reefer manufacturing capacity remains in surplus and material prices are tending fall, thereby keeping finished prices low.”
The report noted that annual container production also fell by 25% in 2016, hitting its lowest level since 2002, with the exception of 2009.
The trend towards a larger share owned by the lease sector “looks unstoppable for the rest of the decade”, it added.
Foxcroft stated: “Most shipping lines are again favouring lease instead of direct investment, as it has been the case since the recession of 2009.
“Sale and leaseback is expected to remain a popular option for lessors and lines alike, while leasing firms will also account for at least half of all new container investment through 2017-19.”
The global container equipment fleet grew by just 0.8% in 2016, which was the smallest since the recession of 2009.