Drewry Warns of High Container Equipment Price Dangers


Higher container equipment prices are to squeeze leasing rate returns, according to Drewry’s latest Container Census & Leasing annual review and forecast report, published this month.

The shipping consultancy has reported that container equipment rental rates and cash investment returns remain “weak”, despite last year’s recovery.

Drewry has found that an earlier rise in container prices, which lifted values to their highest level in five years, will continue to put a dampener on returns.

Long-term lease rates for standard dry equipment increased by over 50% in 2017, having begun their recovery the year before as the Hanjin bankruptcy left large quantities of equipment impounded and therefore out of the market.

However, newbuild prices rose by a similar margin, limiting cash investment returns to around 9%.

Andrew Foxcroft, Drewry’s lead analyst for container equipment, said: “With little change in lease rates anticipated over the next few years, investment returns are forecast to remain under pressure.

“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.”

Neil Davidson of Drewry has explored the applications of retrofit terminal automation in a recent Port Technology technical paper

With the outlook for world trade looking more promising and growth in ship capacity slowing down, Drewry has seen transport operators and especially leasing companies “vigorously” expanding their container fleets.

After expansion almost came to a halt in 2016, Drewry reported that the container fleet grew by 3.7% last year as the industry caught up with demand, leading to it predict that a container production of above 3.5 million TEU would take place from 2017-20.

This would be the most consistently strong production figures seen in over a decade.

Foxcroft added: “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 40ft high-cube.

“Drewry forecasts that 75% of capacity built in the second half of this decade will be of this type.”

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