- The outbreak of the coronavirus has disrupted container supply chains around the world and depressed the demand for vessels and boxes.
- It will lead to a contraction in the shipping container fleet and keep prices and lease rates under pressure in 2020, although better than in 2019.
- 1Q20 newbuild prices and lease rates for all of the main categories of containers were up on 4Q19 and 2019 as a whole.
Shipping consultancy Drewry has warned that the COVID-19 pandemic will result in a decline in the size of the container equipment fleet in 2020 – but adds that newbuild prices and leasing rates are expected to firm and there will be a ‘strong recovery’ in trading volumes in 2021.
Newbuild rates at peak
In its latest Container Equipment Forecaster, Drewry found that in the first quarter of 2020 newbuild prices and lease rates for all of the main categories of containers were up on the fourth quarter of 2019 and 2019 as a whole as there had been ‘improving levels of optimism regarding the outlook for world trade’.
But then the coronavirus outbreak went global and it has ‘disrupted container supply chains around the world and depressed the demand for vessels and boxes’.
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.
Drop in container fleets
Drewry expected that this will lead to a further contraction in the shipping container fleet and ‘keep prices and lease rates under pressure in 2020’.
The consultancy added that the remainder of 2020 will be ‘challenging’ with orders dominated by ocean carriers’ and lessors’ needs to replace ageing inventories.
Drewry anticipated that the ocean-borne fleet of containers will ‘decline marginally’ in 2020 – which would ‘represent the first reduction since the financial crisis of 2009 when the pool of equipment declined by 4%’.
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.
The dry box sector was the worst affected with a year-on-year decline in production of 40%.
This compared with a 4% increase in the output of reefer containers as the shift of cargo from specialized reefer and air freight services to liner services and containers continued.
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