Container equipment under pressure, warn lessors

//Container equipment under pressure, warn lessors

Container equipment under pressure, warn lessors

Published on JOC.com (https://www.joc.com)         

Greg Knowler, Europe Editor | Nov 28, 2017 10:29AM EST

Layland Barker, owner of Titan Containers, says the availability of containers is very tight.

AMSTERDAM — Container leasing companies have warned that pressure is building on container equipment as a result of continued strong growth in global demand, the lingering effects of China’s waterborne paint regulations, and rising European exports.

Although the executives that spoke to JOC.com were careful to avoid predicting a definite container shortage, Layland Barker, owner of Titan Containers, said after years of limited trade growth, high volume on the major trades was back and so was the shipper demand for containers.

“This is going to be an issue, we believe. Maybe not just yet, but after Chinese New Year,” he said at the Intermodal Europe exhibition in Amsterdam. “We will likely begin to see problems with equipment in the spring as volume traditionally begins to rise once again.”

Robert Sappio, CEO, SeaCube Container Leasing, said it was too early to say whether there was a shortage of equipment coming, but demand was strong and that would continue in January and early February.

“I would advise BCOs to make sure that in addition to their discussions with carriers over space that they also demand guarantees that equipment will be in place,” he said.

Also highlighting the solid improvement in volume and its potential impact on equipment was Colin Rubery of the Container Traders and Innovators Association. “There is big demand in the pre-Chinese New Year period, but after that when production starts to pick up again there could be an issue. More so this year than last year because of such high demand, so a lot of the stock in China will be used up,” he said

“Container leasing is really a financing business and at the right price leasing companies will take the opportunity to sell their containers. But those containers won’t be fetching high prices in China so that is not where they will be sold. There are 32 million TEU in the world, but the containers have to be in the right place to meet the demand.”

Another lingering issue is the Chinese environment regulation requiring all containers to use waterborne paint that was introduced in April 2017. This led to a surge in orders from carriers enjoying a market upturn as the shipping lines sought to avoid any container shortages ahead of the temporary closure of production lines for conversion work to the new paint.

However, Barker said the paint issue had not yet disappeared. “After being painted, the waterborne paint needs to dry, but winter in China is humid and foggy and that means it takes longer for the container to dry and factories are unable to keep production levels where they need to be,” he said.

“It is very hard to predict the impact this will have because we have never experienced this sort of issue before. It is the first winter with the waterborne paint and we don’t know what to expect. Some production capacity will definitely be lost and that makes me nervous.”

It was an issue also highlighted by Sappio. “The waterborne paint caused the manufacture of new containers to slow, and now there is also the China winter and its humidity that affects the drying time for the paint, and this is causing constraints in supply,” he said.

Barker said Titan saw the market strengthening in November 2016 and ordered 9,000 TEU to keep ahead of demand, but its equipment had now fallen to a critical level. He equated it with driving a car that was running on empty. “If I was driving a car, the yellow fuel light would have been on for a long time,” he said.

“I have written to our customers and told them that equipment is running out and there may be shortages in some locations. There will be enough containers for shippers in Asia in December and January, and in May and June. The problem will be in March to April and maybe even May, where if the market growth continues there may not be enough boxes available for the spring.”

It is not just a westbound problem either, Barker said, with Europe exports increasing strongly to China and Europe-China rail cargo gaining in popularity. “Containers on the rail services out of Europe was not much of a factor 18 months ago. The rail route uses exclusively 40 foot high cube containers and those boxes are in short supply.”

By |2017-11-29T16:53:31+00:00November 29th, 2017|Industry News|Comments Off on Container equipment under pressure, warn lessors

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