Turning Point? Demand For Shipping Containers Has Fallen

Container lines continued their strong performance in 2021 in the first quarter of this year, but the container equipment market showed signs of weakness.

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Container production will also rise as more shipping lines and chartering companies order new containers. At the same time, liner companies will have to rent containers for longer periods of time, which will lead to higher rates for container leases and higher prices for used containers after leases expire.

Triton International, the world’s largest container leasing company, said recently that container production, prices for new containers, lease terms, lease rates and prices for old containers are all falling.

Brian Sondey, CEO of Triton, noted that while the current market is still good, it is down from last year’s unprecedented equipment shortages and rate levels and closer to the market norm.

Global container production hit an all-time high of 7.18 million TEU in 2021, according to data from Delury. Production in 2022 is expected to be well below last year’s levels.

Sondey says liner companies are ordering containers more cautiously this year, and leasing companies are ordering fewer boxes.

The data show that the average price of a new crate was close to $4,000 /TEU in mid-2021, but fell to $3,400 /TEU three months ago and is now just under $3,000 /TEU, down 25% from its peak but still above pre-pandemic levels.

Container leases are also below their highs of 2021. In 2021, liner companies will lease containers from Triton for an average of 12-13 years. By 2022, the average lease had fallen back to 10 years.

Another key indicator is the sale price of used boxes on the second-hand market. Last year, liner companies put all the old boxes they could find into use, causing the number of boxes available for sale to plummet and the price of used boxes to reach a record high. Since this year, old box price also appears to drop.

Market dynamics in the container equipment sector suggest a decline in demand in the containerization market compared to last year.

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There are clear signs that the historic period of growth that has driven the market and generated huge profits is coming to an end, according to a new half-year forecast by Danish Ship Finance, the Danish shipping investment bank.

‘In the short term, the current fuzzy demand outlook and growth in available capacity could put pressure on container rates and prices of used container ships,’ the agency said in its latest forecast.

In the longer term, the market deterioration will accelerate with large inflows of vessels above 12,000 TEU and weak demand outlook. This is likely to put significant pressure on most container markets, particularly by increasing the risk that ships owned by tonnage suppliers will be awarded contracts again.

It added that “market fundamentals suggest a decline in the market’s earnings and used container ship prices for the remainder of 2022. We expect the underlying drivers to gradually deteriorate over the next 18 months before a potentially severe recession begins in 2024.”

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