Drewry: Container Prices to Squeeze Leasing Rate Returns
Container equipment rental rates and cash investment returns remain weak, despite last year’s recovery, shipping consultancy Drewry said.
Long-term lease rates for standard dry equipment leapt 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. But 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,” Andrew Foxcroft, Drewry’s lead analyst for container equipment, said.
“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.”
With the outlook for world trade looking more promising and growth in ship capacity slowing down, transport operators and especially leasing companies have been vigorously expanding their container fleets. After expansion almost came to a halt in 2016, the container fleet grew by a robust 3.7% last year as the industry hastened to catch up with demand.
Prospects for the coming years are almost as good, with container production expected to be above 3.5 million TEU in all four years from 2017-20, which would be the most consistently strong production figures seen in over a decade.