The disruption of container supply chains globally by the coronavirus outbreak and the decrease in demand for ships and equipment will lead to a contraction of the container fleet and will keep leasing prices and rates under pressure in 2020, although they'll be better than in 2019.
According to the latest report from Drewry's Container Equipment Forecaster, in the first quarter of 2020 the prices to construct new containers and the leasing rates of all the main categories of containers increased when compared to the fourth quarter of 2019 and the year 2019 as a whole.
This was mainly due to improved levels of optimism regarding the prospects for world trade: as the US and China signed the first phase of a new trade agreement and the Brexit agreement was concluded. From the perspective of the container manufacturing sector, it seemed that the efforts made by China's leading container builders to secure minimum prices for their equipment were having some success. Leasing rates also increased by 15% to 20% compared to the fourth quarter of 2019 for dry cargo equipment (20ft, 40ft, and 40ft High Cube).
But these increases masked intense market instability during that period. At the beginning of the year, the price of a standard 20-foot container stood at about $ 1,750. By the end of February, it had risen to $ 2,150, before falling to around $ 1,900 in late March as a result of the blockade due to COVID-19 in China and subsequently in large parts of the rest of the world.
Total container production (dry and reefer) in the first quarter of 2020 was one of the lowest registered in a quarter; it was 33% lower than in the fourth quarter of 2019 and 35% lower than in the first quarter of 2019. The dry sector was the most affected, with a 40% year-on-year decrease in production. Meanwhile, the production of reefer containers increased by 4%, as cargo continued to shift from specialized refrigerated and air transport services to line services.
According to Drewry, while the COVID-19 pandemic will lead to a decrease in the size of the container equipment fleet in 2020, new construction prices and leasing rates are expected to remain firm. A strong recovery in trade volumes in 2021 will reinforce this situation.