container shipping long-term investment

Container Shipping is a Great Long-Term Investing Strategy

Posted on Posted in Global Demand

The shipping industry is a significant contributor to worldwide economic growth. In fact, it has been said that an estimated ninety percent of world trade is transported by the global shipping sector. This kind of international dependence makes an investment in the shipping industry a great long-term investing strategy.

Albeit shipping has always played an important role in building prosperous nations, it was not until Malcolm McLean’s introduction of container shipping in 1956, that the world’s dependence upon the industry would really begin to grow. The United States’ participation in the Vietnam War helped McLean’s efforts to introduce shipping containers into Asia, and as more ports across the world adapted to the new cargo containers, shipping was truly revolutionized. Along with the container revolution came opportunities for investment.

Analysts estimate the size of the worldwide shipping container fleet to be approximately 40 million TEU. The vast majority of shipping containers currently in operation are owned by either a container leasing company or a shipping line. Some shipping lines own all their containers, others own some of their containers and lease the remainder from a leasing company, and some own none of their containers and lease all their shipping containers.

Even with an average fleet age of 12 years, it is estimated that shipping lines and leasing companies need to order approximately 3.2 million TEU per year, to keep their shipping container fleets topped up. Based on these figures, it is estimated that nearly 500,000 TEU per year must be built – mainly at factories in China, to maintain the industry’s global fleet.

The shipping container industry has been growing steadily since its inception. Looking to the industry’s past performance for insight, it is expected that demand for container shipping will continue to steadily rise in the future. In 2017 for example, According to reports from JOC, the global container ship fleet will grow around 3.1 percent in 2017, a level of growth faster than 2016. Moreover, Alphaliner’s survey of over 150 ports around the world reported that global container port throughput is estimated to increase 4.6 percent this year (2017).

Although the container shipping sector has experienced challenges in the last decade, mergers, acquisitions, and alliances have addressed overcapacity concerns, and the stronger global economic demand has demonstrated a strong and rising need for continued investment. In doing so, the container shipping industry has emerged as an investor’s favorite alternative investment.

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