The cost of buying empty shipping containers hit a three-year low in the final quarter of 2019 as box manufacturers continued to struggle with intense competition in an oversupplied market, according to a report today from the U.K. shipping consultancy Drewry Shipping Consultants Ltd.
Some additional variables that have deflated the "newbuild" prices of freight container boxes include softer prices for key materials, such as stainless steel and corten alloys—a type of steel mixture that doesn't need painting—Drewry said. However, the main forces depressing the sector were competition, overcapacity, and uncertain trading prospects in the liner industry, the firm said.
Dry box newbuild prices have now fallen 27% since their last peak at the end of 2017, while refrigerated (or "reefer") equipment pricing, where supply conditions have been tighter, slipped 6% over that period, according to Drewry's recently published "Container Equipment Insight" report. Drewry's "Dry Shipping Container Newbuild Price Index," which tracks values of new 40-foot, high cube containers, dropped five points in the quarter to a value of 77, representing an annual decline of 13%
The sector is not on track to post much of a recovery in the near future. Pricing is expected to stabilize through 2020 as demand for new container equipment recovers, but this is not anticipated to be sufficient to lead too much of a recovery, Drewry said. Hence, the firm expects further cost cutting and the possible closure of older production facilities with more consolidation to come.
Despite the low price of buying empty containers, the market for transporting containers full of inventory has never been better. Earlier this month, Drewry reported that its composite index of non-contract—or "spot"—container rates increased 2.2% in January compared to the same period last year. That was good for an all-time high, as the average composite index of the firm's "World Container Index" year-to-date, reached $1,832 per 40-foot container.
Newbuild prices of freight container boxes hit a three-year low at the end of 2019, as intense competition in an oversupplied market heaped more pressure on box manufacturers.. Read more: https://t.co/69GDa8weHJ pic.twitter.com/yakWgxS4xt— Drewry (@DrewryShipping) January 27, 2020