The depot stock of leasing containers seems to run short in China. As for the acuteness, a lease company repairs a sale container and turns it for leases. The depot containers should be generally leased under Master Lease Agreement (MLA). MLA should be determined lease rate, redelivery places, limitation of monthly redelivery quantity by place beforehand. In addition, DOC (Drop Off Charge) is set in the return place. The lease company asks the shipping company for a part of the cost by degree of the possibility of the re-marketing at the return place under the name of DOC. The shipping lines will determine whether they return or bring back these containers in comparison with the amount of money of DOC and the empty positioning cost by themselves. Of course the shipping lines are different in the return condition by each lease company because they have various lease companies and master lease contracts. The lease companies have different content of MLA with shipping lines so that shipping lines have a return priority by leasing company on where and how many containers they return. However, the lease company sets DOC as high as possible to have the shipping lines stop the return at a place having difficulty in re-marketing.
The shipping lines will not decide return of the containers leased from company only by the contract terms such as DOC, the lease rate. It is important for them to obtain better redelivery condition but more crucial if they could secure necessary quantity of containers in the demand area such as China, Asia as they want. At first the shipping lines cover the supply with their import containers and the empty own containers but they will rely for local lease containers when they judge it inevitable. They will decide to bring the lease containers back to the demand area without returning them when they judge that it is difficult for them to secure enough containers in demand area locally.
The first factor of the lack of the containers in current China means that shipping lines themselves could not bring back necessary quantity of containers to the demand area. It is thought that the first factor is caused by bankruptcy of Hanjin Shipping. They were proud of No. 7 in the world of operation scales with 97 containerships and they used to use more than 500,000 units (more than 800,000 TEU). The container lease companies seemed to be pessimistic about future demand when Hanjin Shipping went bankrupt because they thought all containers Hanjin Shipping leased would be put into the market. However, the lease companies are taking time to recover containers from Hanjin Shipping. 3.5 months have passed since Hanjin Bankruptcy but it is still long way to recover their containers because it is not easy to negotiate with custodians to settle the cost for getting them release containers smoothly. In addition, SLB (Sales Lease Back) business of Hanjin Shipping have been causing lease companies who dealt with a considerable problem. There might be a risk for Hanjin Shipping containers to be detained by creditors in case the containers of Hanjin Shipping color and the number will move other than a collection place. Therefore, the users might hesitate to lease Hanjin Shipping containers because they are afraid of such risk.
Hanjin Shipping had operated 500,000 units, which consisted of long term lease of 60% (300,000 units) and 40% (200,000 units) as SLB from the lease companies. As a result, it seems to happen that 500,000 units have been disappeared in the market for a time. The container demand from the shippers who used Hanjin Shipping comes out to another shipping lines. If shipping companies think the current container demand to be temporary they will not consider to secure the demand with the long-term lease containers. The new container stock in China factories maintains at the level of 520,000 TEU at present. The new containers are not short because of winter requiring less demand. The factor of less demand of the new containers is that its price is rising due to hike of steel price in 2nd half of November. The hike of container price will make shipping lines to hesitate in concluding long term lease.
On the other hand, the leasing companies seem to be difficult in placing an order for a large number of containers and speculatively even if they understand the container price will actually rise. The rate of return of the container lease companies fall down, and this is because it cannot avoid rising interest rates of container procurement fund. The immediate income and expenditure improvement of lease companies can be hardly anticipated if we look at the miserable situation with shipping companies. The banks and investment funds who supported them with the low interests must become quiet. The growth of the scale expansion will be difficult in future for the lease companies.
The merger and acquisition among lease companies would come to realistic in the future as the merger between the major lease companies, Triton and TAL announced in last December. Because it is getting difficult for major lease companies to maintain or expand their fleet size under the current slow market and it seems to be tougher to bigger lease companies. By the supply-demand balance of the container a lease rate for depot container in China has been increasing. The new container price of last month was $1,400 per 20f but it is $1,850 per 20f this month. It rises 32% in price. However, a depot container is more than eight year old after shipping companies used in a long-term lease.
It should mean that the lack of the depot container in China is considerably serious if a lease rate of the depot container rises.
The Korean government announced that Hanjin Shipping finished to discharge their containers with cargo from their all 97 containerships by the end of November.The alliance member of CKYHE should have had a tough time to recover their containers from their 97 containerships of Hanjin Shipping. There seems to be a trend not to load their cargo to the Korean shipping lines such as Hyundai Merchant Marine because they might be weak in finance. May it say that these various factors have caused lack of container in China?
Japanese 3 shipping lines announced to integrate of their liner section into one company in the end of Oct after Hanjin Shipping bankruptcy. They will establish a new company next July. They will start business in April, 2018. They will aim at No. 6 in the world with the operation scale of 1,400,000 TEU. However, world’s largest shipping company, Maersk Line announced on Dec 1 that they purchased German ship line, Hamburg Sued, No. 7 in the operation scale of the world. Their operation scale will be 3.8 million TEU after that and they will increase their share from 15.7% to 18.6%. The movements of the world shipping companies are active sequentially.
On the other hand, Iranian state-run ship company, IRISL order 4×14,400TEU containerships at the beginning in December which will be delivered in the 3rd quarter of 2018. The economic sanction to them by Europe and America has been cancelled on Jan. 16. They have declared that they will increase their operation fleet to 600,000 TEU by 2020. According to “World Containership Fleet and its Operation for 2016” that Nippon Yusen published in December, the new 209 containerships with the slot capacity of 1,517,082 TEU will be put in service in 2017 and the old containerships to cover 300,000 TEU slot capacity will be scraped in 2017. However, total new containerships will be anticipated to increase by 40% compared with one of 2016. Therefore, the year of hardship will continue to shipping lines in 2017 as well. Approximately 80% of ordering of the new containerships depend on the investment companies and funds except the order of the shipping companies. How will they think about the future of the container shipping lines?
It is thought that the year of 2017 will become severe age for shipping lines, container lease companies and harbor companies concerned but the severe age should be fraught with the next new leap, buds of the growth. We will not give it up and want to challenge that we will find the leap, a bud of the growth and bring them up.