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May 1, 2009updated 12 Apr 2017 4:38pm

Container lessors encounter turbulence

The container leasing industry has been caught in a tangle of powerful market forces for some time, as consumer demand has dropped and port volumes have melted away worldwide At the end of 2008, only one man seemed to have a smile on his face John Maccarone, the CEO of the worlds largest container lessor, Textainer, who said that 2008 had been a very good year for the industry.

By Fred Crawley

At the end of 2008, only one man seemed to have a smile on his face – John Maccarone, the CEO of the world’s largest container lessor, Textainer, who said that 2008 had been “a very good year” for the industry.

Maccarone made two predictions for 2009: first, that further traffic and rate slumps would prompt capex reductions for all the major lines, raising leasing penetration among box fleets despite dwindling volumes. Secondly, that intense consolidation would ensue, as – in his words – “less well financed leasing companies will look for bigger partners”.

Unsurprisingly, he was not wrong. Analysts at Morgan Stanley have predicted a 3 percent reduction in global container traffic this year, which takes into account the continued growth of Chinese port traffic.

Maccarone’s second point has been proven by Textainer’s acquisition of the management rights to the 150,000-strong 20ft box fleet of Amficon, the largest container lessor both owned and operated from the UK, bringing total fleet size up to 2.2 million units.

In addition, the Amficon fleet provided Textainer with a significantly increased fleet of specialised flat rack and open top containers, allowing the American company to entrench itself in more areas of the shrinking shipping market.

Basil Henley, managing director of Amficon and veteran of the container lease industry since the company’s inception in 1972, said that Amficon had sought out the deal, and stood to benefit greatly from economies of scale as a result of its partnership with Textainer.

When asked about the possibility of further industry consolidation, Henley said he was “convinced” that more acquisitions were on the cards before the leasing market reached equilibrium with atrophied shipping routes.

Other big box lessors seem to be tackling the situation through bulking up, too. Last year, Florens Container Holding, the container leasing subsidiary of the East Asian Cosco Group, increased its fleet size by 6.7 percent to reach 1.6 million units – even though this represented a gearing down from 2007’s 21.5 percent growth.

As the year progresses, the container lessors to watch with interest will be those whose fleets would provide a strategic advantage to a larger competitor, and who would benefit from the security of economies of scale.

Fred Crawley

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