By Mike Wackett
Textainer, the world’s largest container leasing company, posted a $56 million net loss in 2016, following a $110 million profit the previous year, but remains positive. The box lessor, which has a fleet of some 3.1m TEUs, said there were “a number of positive trends” that should help it “turn the corner”. It said new container prices were about 70 per cent higher than the low point of last July, the value of used containers had increased 15-25 per cent since September and rental rates had “more than doubled” in the same period.
The main reason for the hikes was the sharp decline in dry container production last year after manufacturers suffered significant losses in the first six months, resulting in a shift in the supply-demand balance. Textainer said the new dry container production last year of 1.8 million TEUs, against disposal of 1.5 million TEUs, meant the world’s container fleet “barely grew” against a backdrop of growing demand and higher utilization levels.
Meanwhile, the financial impact of the Hanjin failure on Textainer was $53.3 million, including a $12.1 million reduction in revenue, while container impairment values, taken into the books as at 1 July, resulted in a further hit of $66.5 million. However, Textainer said it had recovered, or was in the process of recovering, some 80 per cent of the 150,000 TEUs leased to Hanjin, and was “actively negotiating” the release of another 13 per cent.
But at its full-year results presentation, President and Chief Executive Philip Brewer said he expected the final recovery toll would be around 90 per cent. “We will only recover where it is economically justified,” he said, explaining that each container recovery was analyzed to take into account charges being demanded by the terminal or depot and the cost of restitution against the asset value. Textainer said it had insurance to cover the value of the containers it was unable to economically recover. It also has insurance cover for up to 183 days of lost lease rental from the date of Hanjin’s insolvency until the boxes are recovered.
Textainer said it had managed to put 28 per cent of the ex-Hanjin boxes back on lease “at better rates” than those agreed with the South Korean line. With supply currently “tight”, market improvements were “significant”, said Mr. Brewer adding that margins had “increased dramatically”.
However, he warned that the benefits would take time to work through into the company’s accounts, given that daily hire increases would only occur when leases are renewed. Furthermore, Mr. Brewer said, the cost of the recovery of Hanjin containers would continue to have a negative impact, due to a lag in the insurance reimbursement.
Mr. Brewer said that container manufacturers were only now “getting religion”, having sold containers at below production cost for too long. “Steel prices are 80 per cent higher that they were one year ago, which, combined with the switch to waterborne paint (in response to Chinese environmental regulations), should help support new container prices at their current level above $2,000,” said Mr. Brewer.
During 2016, Textainer spent $480 million on more than 286,000 TEUs of new and used containers.
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)