2017 is shaping up to be container shipping’s best year in nearly a decade. With freight rates on the rise and operating costs on the decline, container lines can expect a boost in shipping profits now and in the future. This outlook is inspiring more interest and investment in the industry.
There was a time when the cost to transport a container was so low that container lines were losing money with each voyage. This resulted in losses for a majority of container shipping leaders in 2016. Maersk Line, the industry’s leader, reported an annual loss of $376 million for 2016. In contrast, the company has forecast a shipping profit of one billion dollars for 2017.
In late June of 2017, the Shanghai Containerized Freight Index (SCFI) experienced a growth spurt, nearly doubling the SCFI rate from a year earlier (2016). Influenced by a new round of FAK (freight all kinds) rate hikes, and a disciplined intended implementation of peak season surcharges (PSS), spot rates from Asia to North Europe gained 15.1 percent; rising to $1,015 per TEU. The SCFI component for the United States’ West coast saw rates soar 26.2 percent to $1,378 per container. This has meant a return to profit for most container shippers.
The last couple of years (2016, 2017) have seen a flurry of mergers, alliances and partnerships between container shipping leaders. In the interest of survival, one time rivals have found common ground and reached partnership agreements. This has helped them to lower operating costs on major trade routes and reduce competition throughout the industry.
With volatility in the shipping sector seeming to be a thing of the past, institutional and private investment is returning to the industry. For one, there is an urgency to invest in containers to meet the rising demand for shipping services. In late July 2017, COSCO announced that it will invest more than two-hundred million dollars to purchase used shipping containers to add to its fleet. They are not the only ones, other shipping leaders are investing in containers too
Over the last decade, the container shipping sector has undergone a positive transformation. In doing so it has emerged as a stronger, more profitable industry and a better investment opportunity for private investors.
When you invest your money, few things are better than seeing a constant return on your investment while also building wealth. There are several types of investments that can both mature and earn a steady income for you. Albeit there are many investment types that have proven they can generate a steady income, the most common examples are real estate, shipping containers, and short term loans. The best way to identify these appealing investment options is to begin with some research.
The most appealing aspect of each of the 3 investment types mentioned above, is that they have demonstrated over the years that they can provide a good investment return, while at the same time earning an income for investors. Here is my brief breakdown of each offering:
In the instance of real estate, you can earn income from a tenant while also paying down your mortgage – which in turn is creating a higher net worth and value in the house. When you sell the house, you could have the entire asset paid for by someone else while you are also the sole beneficiary of the sold asset. Many investors dabble in some kind of real estate and it is often considered to be one of the safest investment types out there.
Although not as commonly known in North America or Europe, investing in containers is another way to generate a monthly income. In essence, investors purchase a container and hire a maritime asset manager to lease it out to international shipping lines. Shipping companies pay a rental fee and investors profit while the asset’s value is paid down.
Short-terms loans can also be a good income producing investment, although they tend to be riskier than the first two listed above. In the case of short term loans, you can make a weekly, or monthly profit form the interest and have the full loan paid back within weeks or months. This is much more common in emerging markets where cash flow is often not as readily available, as in other global markets.
It would seem as though there is a growing trend of investors seeking investment opportunities that will provide a steady income, while delivering long-term performance. The days of making investments and then waiting two decades for a pay-out, are very quickly fading. Nowadays, more and more investment-seekers would like to see a monthly income and count their profits sooner than later. As such, an increasing number are choosing their investments accordingly.