Container Equipment Fleet Grew 8.5 Percent in 2011

The container equipment fleet grew more than expected last year even though new ship orders plunged in the second half and liner companies stopped ordering new containers.

The capacity of the container equipment fleet increased 8.5 percent during 2011, taking the global fleet to 31.25 million 20-foot-equivalent units, compared with 7 percent growth in 2010, according to Drewry Maritime Research’s Container Census 2012.

The new Drewry report says that up to 70 percent of 2011 net additions were made in the first six months of the year, before the fall-off of new ship orders put a damper on container orders. As a result, the price of new dry containers has been volatile.

The report said the underlying reason for the slowdown in the latter half of 2011 was an apparent misreading of demand. Few buyers predicted an oversupply of 900,000 TEUs in mid-2011, and more than 500,000 TEUs by the end of 2011, which was exacerbated by a weak peak season. Even so, utilization of the in-service fleet held at a very high level, topping 95 percent.

One effect of the high utilization rate is that container-to-slot operating levels have dropped to historic lows, close to 1.8:1 in 2010 and 2011, compared with 2:1 before 2009.

This has occurred because shipping companies are working their assets harder, which, considering the increasing container dwell times resulting from slow-steaming, is something of an achievement, according to Andrew Foxcroft, author of the Container Census report.

He forecasts annual container fleet growth will be at around 7 percent from 2012 to 2015 as shipping companies continue to adopt a tight container/slot operating ratio, while also increasing replacement purchases at a faster rate than in 2010-2011.

The growth in the container equipment fleet since 2009 has been dominated by leasing companies that posted growth in their TEU count of 10.6 percent in 2011 and 9 percent in 2009, while orders by shipping lines and other transport companies only increased 7 percent and 5.7 percent, respectively. Investment by shipping lines, in particular, was curtailed when their profits slumped and debts rose. Some lines have tentatively resumed equipment investment, but they are still very much testing the waters.

The price of new dry containers has continued to be volatile, which is affecting the calculated CEU (Capital Equipment Unit) valuation and new-for-old replacement cost of the global container fleet. Dry container prices attained their greatest height of almost $3,000 per CEU in early 2011, by which time the replacement cost of the global fleet was up by more a third from its level at the start of 2010. The fleet’s corresponding CEU valuation was down slightly, however, because of the sharp upward movement of dry container.

Throughout 2011, the opposite occurred. CEU values increased, while there was no real change in the fleet’s replacement cost. This was due to an overall 20 percent decline in the price of dry containers, which subsequently recovered by 20 percent during the first half of 2012, to $2,750 per CEU, before going into decline again.

“The outlook is for pricing to stay high, with the annualized forecast holding at $2,500 for 2012 and 2013,” Foxcroft said.

Contact Peter T. Leach at pleach@joc.com. Follow him on Twitter @petertleach.