The cost of buying and leasing containers surged in the first quarter of 2020, but the long-term impact of the Covid-19 crisis will see the global box fleet contract this year, according to shipping analyst Drewry.

As reported in Lloyd’s Loading List, shippers have struggled to find sufficient box numbers this year due to coronavirus-induced supply chain chaos.

However, according to Drewry’s latest Container Equipment Forecaster report, this was not the reason why in 1Q20 newbuild prices and lease rates for all of the main categories of containers were up versus both 4Q19 and 2019 as a whole.

“Primarily, this was the result of improving levels of optimism regarding the outlook for world trade,” said the report. “The US and China signed Phase One of a new trade agreement and the Brexit withdrawal deal was concluded.

“From the container manufacturing perspective, it appeared as if efforts by China’s main box builders to secure minimum prices for their equipment was having some success. Lease rates also hardened, rising between 15% and 20% compared with 4Q19 for dry freight (20ft, 40ft and 40ft high-cube) equipment.”

Yet according to Drewry, these increases masked intense volatility in the market during the period. At the start of the year, for example, the price of a 20ft standard container stood at about US$1,750. By the end of February, it had increased to as much as US$2,150 before a sharp decline to approximately US$1,900 in late March.

“The severity of COVID-19 and the lockdown in China and subsequently in large parts of the rest of the world was the cause of the slump,” concludes the report.

“Total box output (dry freight and reefer) in 1Q20 was one of the lowest in a quarterly period: 33% lower than 4Q19 and 35% below that of the corresponding period of 2019.”

While ocean carriers and lessors will need to replace ageing inventories, few companies will look to expand their fleets boxes during 2020. As a result, Drewry expects the ocean-borne fleet of containers “to decline marginally, but it could be worse depending on the recovery in trade volumes”.

This would represent the first reduction since the financial crisis of 2009 when the pool of equipment shrank by 4%.

“Even though the Covid-19 pandemic will result in a decline in the size of the container equipment fleet in 2020, newbuild prices and leasing rates are expected to firm,” added Drewry. “A strong recovery in trading volumes in 2021 will reinforce this situation.”

Source: lloydsloadinglist