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Drewry Maritime Research
Maritime Research

Container equipment supply pressure easing

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The rush to catch up with container equipment demand following the shortfall of 2016 has largely played itself out, with 2018 promising to be a year of record production.

The narrative in the box-building industry for the past 18 months has been that leasing companies and transport owners had been wrong-footed by the improvement in container demand last year, and that serious investment was needed if a container shortage was to be averted.

 

That narrative has finally played itself out, with the most obvious result being that 2018 promises to be a year of record container production, according to the latest edition of Drewry’s Container Census & Leasing Equipment Insight report.

 

Drewry’s view was always that, given that few factories were working on double shifts, there was enough capacity in the box-building industry to prevent any sustained tightness in supply, even with the new paint regulations that threatened to extend drying time in the winter and so restrict supply.

 

And so it has proved. Indeed, dry van prices have fallen despite the increase in demand, and the main losers in this phase of the building cycle seem to have been the manufacturers themselves. Despite the strong increase in demand, they have had to trim their prices and have suffered a decline in profitability as a result. Corten Steel price is higher than in 2017, despite some fall in other production costs. New box prices are still above last year’s, but they have weakened as the year has progressed. Even so, the decline has been marginal and Drewry forecasts that prices will be stable for the next few months, barring seasonal adjustments.

 

Container equipment supply growth has been running slightly ahead of demand development so far this year. While this certainly relieves the pressure, it is not in itself sufficient to make up for the investment shortfalls of earlier years.

 

The key yardstick to watch is the operating ratio which is a measure of the maritime container equipment fleet relative to total shipping slot capacity – see chart taken from Drewry’s Container Census & Leasing Equipment Insight report. At the end of the heady days of the last decade this ratio stood at a factor of 2.0 but has since declined to around 1.90. When investment dried up in 2016 the ratio dropped to just 1.88 since which time it has recovered, but is projected to dip below the critical equilibrium threshold of 1.90 by the end of this year.

 

Leasing companies are still the main buyers of containers, maintaining the trend of recent years, so it is little surprise that the uptick in supply has led to a drop-off in lease rates.

 

Away from the dry market, reefer building is still going strong, showing no signs of slackening despite the suggestion that other specials such as tanks would take over the market for high-value units.

Fleet, vessel-slot deployment and operating ratio (m teu)

Fleet, vessel-slot deployment and operating ratio (m teu)

Industry at a glance

World Container Index

East-West composite (US$/feu)

IFO 380 Bunker Prices

Rotterdam (USD$ per tonne)

Global Port Throughput

Jan 2008 = 100

Idle Capacity

(teu)