Why is leasing containers a more viable option than owning?

Why is leasing containers a more viable option than owning?

Have you ever been curious to know who owns the world’s shipping container fleet? We might instinctively come to the conclusion that the shipping lines themselves own this entirely, but the fact is, it is the leasing companies who own over 52% of these containers, while the shipping lines own the balance with a tiny percentage ownership with the shippers.

The container leasing market value touched US$5.20 billion in 2019, and it is increasing at a compounded annual growth rate of 17%. It’s interesting to see that 60% of the goods by value, amounting to over US$4 trillion, move internationally through liner vessels, and these are primarily containerships. In 2018, the world’s ports handled 785 million Twenty-Foot Equivalent Units (TEUs) including empties for repositioning, transshipments and port handling.

Although the large shipping lines use their own fleet of containers for shipping, they cannot function smoothly without leased containers. Since large liners serve most ports of the world, they face an unforeseen shortage of containers occasionally on certain routes, more so the specialized types like flat racks, open tops and so forth. Leasing companies, with their worldwide network, fill this gap with speed, efficiency and a high degree of professionalism.

Let’s now see how the use of leased containers proves beneficial to freight forwarders, shipping lines and factories.

When cash reserves are inadequate and credit is at a premium, downright purchase turns out unreasonable. This is more so when the need for a container is short-term. In a volatile world economy, shipping lines may find it hard to optimize the use of the container fleet they own. With leased containers, shipping lines can make optimum use of their capacity without having to maintain costly inventory, and can even circumvent fluctuations in the availability of new containers.

Easy availability and flexibility in use
To supplement their own containers, shipping lines also opt for leased containers for their easy accessibility near ports. Leasing allows efficient repositioning to different ports. It cuts down expenses in repositioning their own containers. Leasing companies also offer different types of lease agreements like short-term, long-term and master leases. The lessee has the choice to select the most suitable contract.

Conservation of precious capital
Preserving precious capital reserves by using leased containers instead of purchasing new ones helps gain easy access to steady working capital and funds required for expenditures like the day-to-day functioning of businesses.

Seasonal and spot demands
Shippers often face emergency situations when consignments need to be transported urgently to satisfy spot demands for certain commodities. In such circumstances, it’s more economical and purposeful to utilize leased containers and return them to the leasing company after the job is executed.

Geographical considerations
The wide network and quick accessibility of container depots make leased containers the obvious choice under conditions when geographical constraints may prove detrimental to the purchase, ownership and maintenance of containers.

Temporary storage purposes
Factories and businesses may need to store temporarily their surplus production until they are sold or exported. Changing fashion trends, renovations and relocations have to be managed by utilizing additional storage space. Such temporary storage needs can be satisfied cost-effectively with a leased container. One can use a leased container for exactly the duration of the actual need and then return it to the leasing company.

Easy disposal
With a leased container, you have the freedom to return it after the temporary purpose is served. If an owned container is put up for sale, it loses value out of depreciation and worn-out physical state. The leasing process overcomes these disadvantages.

Short-term projects
Businesses dealing in short-term projects require containers on and off for short durations. On completion of the project, leased containers can be returned.

Temporary offices and homes
To serve the purpose of a temporary office, home and dormitory, leased containers come in handy.

Essential facts one must consider while deciding whether to buy or lease are the company’s cash flow, management of related expenses, cost of inventory handling and the duration for which the containers are required. Leasing does not entail a large initial expenditure or the use of expensive credit facilities. Businesses can keep their cash reserves intact and put them to good use for their core activities.

iInterchange Systems www.iinterchange.com offers diverse IT solutions on SaaS www.iboxsuite.com and “On-Premises” model. Their industry knowledge, technical proficiency and focus on customers’ needs make them the right people to collaborate for the software needs of container depots and terminals. iCORAL, a leasing enterprise solution from iInterchange performs the core functions of shipping container depots and delivers optimal levels of workflow efficiency. iInterchange’s skilled team works with customers closely to guarantee a smooth transition and prompt after-sales-service support.

iInterchange offers iCORAL via “On-Premises” model through licensing and also on “Cloud” through subscription.