Global Ocean Cargo Container Leasing is in The Sweet Spot

In the world of global supply chain container leasing, the recent Suez Canal catastrophe may be an example of an ill wind that blows nobody any good.

Disruption from the Suez Canal Logjam Could Be a Modest Positive for Container Lessors is a report issued by KBW – a Stifel Company – which explains the that the disruption drives demand for containers.

“Broadly speaking, disruption to containerized trade is a net positive for the container lessors as it drives a need to add containers to global shipping fleets to address shortfalls from the disruptive event,” says Michael C. Brown, CFA Managing Director, Equity Research at KBW.

He notes that most recently, the effects of disruption have played out in the West Coast ports. For example, Long Beach has seen wait times for ships of up to 21 days due to the combo of supply chain disruption, high demand for consumer goods, and labor shortages.

In the Suez, the compounding effect is due to the unwinding of the logjam and then the subsequent delay in getting containers back to Asia to pick up new goods. Shifting to trade lanes around Africa also results in longer shipping times, and thus is a disruption to supply chains.

“The disruption is a modest positive for the lessors, although ability to lean in is somewhat limited,” says Brown. “Traditionally, to meet disruption such as this, shipping lines would pick up containers in China to meet export demands there; a need that the lessors would often address. The challenge in the current market is that the tight supply conditions make it hard for the lessors to lean in: utilization rates are near maximum levels and container factories are booked out through July. “

In Brown’s view, the Suez Canal crisis highlights the shortage of containers in the global fleet that has been impacting the market since mid-2020.

“This supports his contention that the supply and demand dynamics in the container trade market will remain tighter for longer, reinforcing his positive bias for all three lessors: TRTN, TGH, CAI,” concludes Brown.
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