TKR Engineering’s Mini-Guide to Getting The Best Container Rental Services
Most leading container shipping lines have their global network of services connecting some of the major international trade routes. They own sizeable fleet of containers of their own to meet their global business needs. However, it is neither practically acceptable nor cost-effective to maintain 100% own containers to do business for shipping purposes. Many shipping companies ensure pliability and the quickest access to container units in the anticipated location at the right time on demand. As such, many shipping companies prefer to keep a blend of owned and leased container that is available to them at that point in time.
The carriers may face a state of affairs where they have a shortage of containers at some locations or they may have a need of certain types of containers (Flat Racks, Open Tops, high cube GP 45ft/48ft etc) at other locations. The necessity to ensure the availability of container units as and when required is the leading consideration for many shipping companies to go for leasing. Having said that, leasing may be a suitable choice for the carriers to avoid the costs and problem of re-positioning their own units and also capital investment in container rental service. To respond to the unpredictable and multifaceted shipping market conditions, many company rental services try to maintain their own container stock in the range of 40% to 60% out of their clients’ total container fleet.
In all honesty, leasing is approximately 60 to 70% more expensive compared to ownership from an operational point of view. On the other hand, the size of container fleet handled by the pioneer Leasing companies like Textainer, Pacific Tycoon, CAI International, Triton, Florens, and among others, show their growing market share in the container leasing business internationally. This is because of the comparative business advantage of different lease choices provided by the world-class container rental service companies. Statistics show that in 2019, container rental service companies owned approximately 41% of the global container fleet. The remaining 59% are under the ownership of ocean carriers and other transport operatives.
Different Kinds of Container Rental Services
There are several kinds of container rental services. Here are the few main ones.
Master lease agreement is exclusive among the leasing choices as it permits a great amount of flexibility to the shipping line or other renters. A master lease is designed for a range of containers (maximum and minimum), the duration of the term is flexible (usually short to medium). Furthermore, the collection and return locations are generally more flexible and based on credits.
The leasing company is accountable for the full management of the container fleet (maintenance and repair) and for re-positioning following off-hire and contract conclusion. Under this agreement, the container rental service company acts as a logistics service provider as it has to allocate the distribution of its container assets in line with the container service renters’ transport strategies. This type of agreement permits full flexibility with respects to the location of the containers and as such helps the shipping line to plan and estimate their costs accordingly.
Long Term Lease
Long term rent (sometimes referred to as dry lease), is implemented for longer periods of time which varies between 5 to 8 years. The duration of the lease is equivalent to about 1/2 of the useful life of a container. Unlike a master lease, it does not include any management service by the container renting company. Long term leasing comes with a fixed number of containers and has a predetermined re-delivery timetable. Under this agreement, the container renter is responsible for all kinds of management of the containers during the contractual period. This includes maintenance and repairs and re-positioning. At the end of the schedule, the container renter can either renegotiate the terms for the lease’s extension or deliver the container to an agreed location.
Short Term Lease
Short term container renting (sometimes referred to as ad hoc or spot lease) is generally related with the renter’s temporary need for equipment. Its time frame may be for one way or round-trip service of a vessel. The prearrangement normally takes place when there is a provisional surge in demand either cyclical or unforeseen. Container rental service companies try to avoid having a large share of their equipment on the spot market as container rental fees are unpredictable and strongly influenced by the current global market conditions. During low demand periods, the risk exposure of short-term lease is high due to expected increase in the capacity of indolent equipment. The renter is responsible for re-positioning and repair of the equipment.
Container shipping companies need to build up a container inventory having a suitable blend of owned and leased containers which can help maximize utilization of the equipment for fulfilment of its growing business obligation. At the same time container units to be hired under a combined policy of master lease and long-term lease to get optimal flexibility for maximum utilization of the units as per the business plan of the container rental company.
Container Rental Services is definitely an important aspect when you are looking to transport items long-range by sea. If you ever need such services, do not hesitate to contact us. We are willing to accommodate your container rental service needs accordingly.