The Mechanics of Shipping Container Investments

Shipping rates are on the decline and there has been a 54% drop in the past 3 months. The Baltic Dry Index now suggests that there is some disconnect in the demand and supply in the shipping industry. The thumb rule is that when the price of any product moves up fast, there will be certain dislocations in the market that offer a good opportunity for making profits. Though shipping rates are plummeting there is one segment of the shipping industry that has benefited and posted much higher profits than it had during the economic peak prior to 2008.

The Demand and Supply Game

Containership activity is up substantially. This has occurred because though the container rates are down and container shipping volumes have risen, the supply of containers has not proportionately grown. This, in turn has resulted in a rise in container leasing rates.  Not many realize this, but intermodal containers or standardized shipping containers have had an immense impact on the lives of people.

Before these entered the shipping space, it would take a week to unload a fully-packed cargo ship. Today, it takes less than 48 hours for a crew of 6 to unload 3,000 containers. It goes without saying that space on the ship is used more efficiently due to the standard shape and size of these containers. Approximately 90% of goods are shipped in them and manufacturing and global trade relies very heavily on containers. Though many shipping companies own them, they are dependent on container leasing companies for a large percentage of the supply.

Smart Investing

The demand easily exceeds the supply which consequently makes well-planned shipping container investments a lucrative proposition. The shipping industry is in fleet-expansion mode and veering away from investing in assets like shipping containers. Before 2009, shipping lines were very aggressively procuring these assets but the economic downturn changed all that. Today the focus is on lean operations and leasing containers is the preferred alternative.

Industry analysts have projected that investors have plenty of reasons to consider investing in containers. Growth and prosperity in trade across the world benefits those who make the best shipping container investments. To date in 2014, the containerized system is made up of more than 27 million TEU and the investment community can easily expect the containerized transportation industry to continue being a key contributor to growth in China and globally as well.  

The Transformation

Local markets and economies in China have been transformed with easier access to the international economy. This transformation process has been boosted with newer supply chains. With every passing year, the global economy becomes increasingly integrated. There have been some evident changes in political and economic ideologies. Standardization and reduction in regulatory barriers has added impetus to the mechanics of trade.

All these factors have led to a rise in demand for leased containers. These investments offer steady returns and transacting with a reliable company makes it a low-risk proposition. Investors can start out with acquiring 5-10 containers, sign an agreement with a well-established container leasing company and then sit back and enjoy steady returns for years to come.