With the background of increasing Export which has caused the shipping lines left cargo unloaded in some ports due to no space of the ship the shipping lines have been successful in raising the freight rate like 30% up to Europe from April, 60% up to US West Coast and 40% up to US East Coast from May for fiscal year of 2010.However, the revised freight rate has just recovered 90% of the one before Lehman Shock. This raise has been brought by reduction of the ship space of each alliance.On the one hand shipping lines have already introduced the ship space of one million TEU for the past one and half a year which had been moored to adjust the ship space. More ships will be put in the service from now on. People never learn a lesson in the past. We are afraid that shipping lines might get into the freight competition again by more ships coming into the market of which ship space would exceed more than the volume of the export cargo.
Shipping lines have operated their ships under ESS(Extra Slow Steaming) which has started to save the fuel oil. After Lehman shock it has been well adopted in order to make more ships in service including the newly built ships. However, in operation it will require more containers and at the same time, it will take time to bring back the containers to the demand places. Therefore, shipping lines will have to rely more on leasing containers before their in-fleet containers are smoothly rotated in their service routes. This is the main reason why such big container shortage has been created in Asia (including Japan) such as emptying the depot stock of leasing companies in Asia and solving the long idling factory new containers and in addition it has been forcing leasing companies to place an order for the new containers with China factories.
On the other hand Chinese container makers have been increasing their capacities but they could not fully meet the demand because of difficulty in prospect of steel price, shortage of labor and skilled labor. As a result, the new container price is over $2,800 per TEU delivering in Aug’10 which is the highest in the history and $3,000 per TEU to come into view to attain. Therefore, shipping line will stay away from own purchase and will take a wait and see attitude while leasing long terms containers from leasing companies to overcome the current situation.
On the contrary leasing companies who are supported by ample fund will conflict with other leasing companies to increase as many own new production as possible with Chinese makers. All leasing companies have been enjoying high utilization of containers such as over 95%. Some leasing company is said to reach to 97~98% utilization already. This is the highest in the history which has exceeded the highest before Lehman shock. Who could predict such an unprecedented great container shortage one and half a year after the worldwide economic turmoil which is called to happen once a hundred year?
Europe will take time to improve economy while USA has been in process of economic recovery. China will lose its ascendancy as the factory of the world in the near future because fear of increasing wage after labor dispute, the policy of hegemonism by Chinese government and the policy of Buy Chinese etc may dissuade many enterprises to invest money in China. In the meantime, economic growth of India, East Asia has been outstanding. Therefore, if the continual appreciation of Yuan, wage raise, labor dispute causing the factory stop may expedite many factories to shift out of China. Taiwan and Korean enterprises have already been in shifting their pivotal foot from China into India, East South Asia in view of the coming world over 10 years. The world will follow the same road as before like container manufactures had been moved from Japan to Taiwan, Korea, China to seek cheap labor cost. It is matter of time that China will lose its position of the world factory but for the time being more cargo movement will be seen in Asia with China at the center of a circle.
Shipping lines and leasing firms will have to replace the existing fleet with new containers in a 12~14 cycle under any circumstances. Therefore, the retired containers will be put into the 2nd hand market by shipping lines and leasing firms. Nowadays, sales profit of the retired containers has far exceeded its book value and it has grown as one of the main revenues of shipping lines and leasing firms. Meantime, there are strong and steady demand for the retired containers in the market for sending the places where shipping lines and leasing firms could not accept them and the cargo which shipping lines don’t want to load but NVOCC could use them as SOC. The retired containers are also very popular for a storage box at the home market and foreign market.
Sales container price will be subject to balance of demand/supply in the market to great extent. However, it will be also influenced by the new production price. In terms of the trend of increasing sales container price it is good to buy the retired containers as long as it is determined as the market price.