Promising outlook for lessors


Despite the current and considerable geopolitical challenges and uncertain trading conditions, lessors of intermodal containers are in a generally optimistic mood.

The past six months have seen lessors and traders take delivery of more than 650,000 TEU, up almost 38% on the previous six-month period and more than 72% ahead of the same (Q4 2022-Q1 2023) period.

The medium-sized lessor Touax is one such company that has committed additional funds to buy more equipment. Fabrice Walewski, managing partner of Touax, explained: “The flexibility brought by leasing solutions in moments of uncertainty and change should, therefore, be sought by our clients. To be ready, Touax has increased its investment capacities to more than €250m to better support our customers in 2024.”

Last year Touax signed exclusive agreements with the Real Asset Income Fund and a newly created fund backed by the European Investment Bank. The money will be invested between 2024 and 2026 and across all of Touax’s asset leasing operations which also include railcars and barges.

Poor performance

According to research carried out by Drewry Maritime Research, 2022 and 2023 were disappointing years for the sector. Overall, lessors took delivery of fewer containers than in 2020 (1.9m TEU) and 2021 (4.2m TEU). In 2022, concerns had started to grow over the potential for growth following the boom in trade during the second half of 2020 and throughout 2021.

Drewry’s research noted potential negative impacts from the oversupply of equipment had built up in the fleet following record deliveries of containers in 2021.

Consequently, lessors slashed their investment programmes, only ordering containers that were absolutely necessary to support their clients’ needs. They were also focused on selling older containers that had been kept in their fleets during the pandemic into the secondary market. In both 2022 and 2023, lessors saw their share of the fleet decline.

Growing optimism

This situation is now changing. The supply/demand balance in the global equipment pool has improved. Now that cash flow for ocean carriers has slowed down from the huge profits earned in the 2020-22 period, they have less money to buy new equipment.

Manufacturers have recognised this, and cut prices significantly in the last few weeks of 2023. That has meant buying new containers has become far more attractive for lessors, and falling interest rates have reduced financing costs.

There have, however, been several significant short-term trading and operational factors that have reduced container productivity levels and influenced leasing companies’ investment strategies. Shipping lines diverting vessels deployed on trades out of Asia to Europe from the Suez Canal to routing around the Cape of Good Hope has added eight-to-ten days of additional sailing time to each voyage.

This has caused backlogs in several ports, especially in the Mediterranean region. There have been delays in containers being returned to Asia, with notable shortages of equipment occurring at certain times in South Asia, particularly India, and in some parts of China.

Other supply chain challenges including the draught restrictions in Panama Canal and to a lesser extend the collapse of the Francis Scott Key bridge in Baltimore have also affected container productivity levels.

Essentially, events like these mean more containers are needed to move the same volume of cargo.

Research by Hamburg-based online container trading and leasing platform Container xChange reveals the impact on container prices and lease rates with the group referring to “a notable uptick in average lease rates since the beginning of 2024”.

“One-way leasing rates are mainly driven by increasing financing costs and differences in container prices between origins and destinations,” said Christian Roeloffs, co-founder and CEO of Container xChange. “This has resulted in China-US leasing rates increasing on the back of a widening container price delta.”

Strong market

Fundamentally, the prospects for the leasing sector are sound and further growth is expected.

“In 2024 we will further increase the volume of new containers traded in both the Americas and Europe,” said Walewski. “After selling 10,000 new containers in 2022 and 12,000 in 2023, our objective is to achieve a minimum of 15,000 units in 2024 and more in the years to come.”

Drewry believes lessors will gain market share year-on-year up to 2028 when they will own an estimated 52.6% of the global container fleet. Moreover, returns on assets are expected to improve with annualised returns for standard dry freight equipment in the 9.8% to 11.2% range. This is higher than the 8.7% to 10.8% range in the 2019-23 period. The improved profitability is expected to help Bohai Leasing find a buyer for Seaco.

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