zoomImage Courtesy: Maersk Line

2016 could prove to be the weakest year for box production since the collapse of 2009, with equipment increasingly in surplus and the prices decreasing, according to the global shipping consultancy Drewry.

Prices for new dry freight containers declined to their lowest point since 2002 during the first quarter of 2016, recording a 15 percent fall, and are still going down, as the deteriorating outlook for trade growth impacts pricing, says Drewry in its Container Equipment Insight.

Consequently, the shipping consultancy estimates that the container manufacturing sector made a small net loss in Q1, due to the fact that steel and other material costs are no longer in decline. Used dry freight container prices lowered as well, to a level not seen since in almost a decade.

“New box output has slumped markedly this year, with leasing companies again showing a strong reluctance to buy,” Andrew Foxcroft, Drewry’s lead analyst for the container equipment sector said.

Central to the problem is the already sizeable stockpile of new containers at factories in China, including substantial production from 2015 still awaiting collection, as explained by Drewry.

The depressed state of rental rates which dropped further during Q1 are another reason for the lessors’ inactivity. The average fell another 10 percent on its position late in 2015, having declined in line with prices.

In conclusion, Drewry says that the slowdown suffered recently by the box lease industry has largely stalled its previous strong rate of fleet expansion, which had already resulted in lessors regaining much of the share lost during the preceding decade.