In the last 18 months, the container construction, leasing companies, and shipowners made a mistake when calculating the increase in container demand for 2017, and the investment needed to avoid a shortage of units.
The problem was solved in the most obvious way, and 2018 promises to be a year of record container production, according to the latest edition of the Drewry's Container Census & Leasing Equipment Insight report.
Drewry has argued that, since few factories were working in double shifts, the container construction industry had sufficient capacity to avoid any sustained shortages in supply, even when taking into consideration the new paint regulations that threatened to extend drying times in the winter, which would restrict the offer.
According to Drewry, that's what's happened. In fact, despite the increase in demand, prices of dry containers have declined, and the main losers in this phase of the construction cycle seem to have been the manufacturers themselves.
Despite the strong increase in demand, they had to cut prices and, as a result, have suffered a decrease in profitability. The price of Corten steel is higher than in 2017, despite a drop in other production costs. The prices of new containers are still above those of last year, but have weakened as the year progressed. The decline has been marginal and Drewry predicts that prices will remain stable over the next few months, except for seasonal adjustments.
The growth in the supply of containers has remained slightly ahead of the demand so far this year. This certainly relieves pressure, but it's not enough to compensate for the investment deficit of previous years.
The key criterion to be observed is the operation relation, which is the proportion between the measure of the container fleet and the total capacity of spaces in the container ship fleet.
In the last days of the last decade, this proportion remained at a 2.0 factor, but it has decreased to around 1.90. When the investment ended in 2016, this proportion only decreased to 1.88, but the sector expects it will fall below the critical balance 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 not surprising that the increase in supply has led to a drop in rental rates.
Meanwhile, reefer container construction continues to strengthen, showing no signs of weakening despite the suggestion that other specialized equipment, such as tanks, would take over the high-value units market.
Source: MundoMaritimo
