Shipping Container Investments Can Protect Against Inflation

When planning and managing your investments, inflation is an influential economic factor that you must take into consideration, and carefully plan for.

Inflation is the rate at which prices for goods and services is rising. For example, if you invest in a stock that provides a 5% return, but inflation is 6%, you are actually losing buying power.

Over time the price of buying things, from a loaf of bread to a new home, often rise. When these increases become excessive, your purchasing power will decline rapidly. This presents challenges for consumers and investors.

When it comes to protecting your investment portfolio from the adverse affects of inflation, there are a few strategies you can adopt to avoid unnecessary hardship; one of which is investing in containers.

In addition to generating income, shipping containers provide diversification too. The container shipping industry gives investors access to countries that may not be experiencing inflation. Diversifying in assets that work abroad, such as shipping containers in emerging markets, provide protection for your portfolio by operating outside the perils of the domestic economy.

Like other commodities, such as real estate investments, the value of container investments tend to rise when inflation is rising, and therefore provide protection against the decreased value of a currency.

rising inflation investing quote

“Inflation is going to be something that may gradually affect your portfolio. Whether that effect is positive or negative depends on the actions you begin to take. You want to be diligent about your investments knowing that change is afoot.” – Craig J. Ferrantino, President of Craig James Financial Services.

Economists agree that inflation is an economic phenomenon that you can expect, with near certainty, will occur at some point in time in your investing career. So, it’s important for you to understand how to invest and plan in such a way that your assets maintain their purchasing power. Consider this … placing money in a saving account will cause a major loss in purchasing power by retirement. Hypothetically, earning 4% in a savings account while inflation grows at 7% makes you feel 4% richer, when in fact you are 3% poorer.

Why Are Shipping Lines Investing In Reefer Containers?

Despite challenges in container shipping, the demand for transporting climate sensitive cargo – such as food and pharmaceuticals, has risen significantly over the last few years.

The controlled atmosphere technology used in many reefer containers allows for the air’s composition inside the refrigerated containers to be altered to accommodate the needs of the product being transported. This ensures that fruits, such as avocados and bananas, enter the marketplace at the optimum ripeness.

We see particular growth potential in the fruit sector. – Juergen Pump, Senior Vice President, Hamburg Sud North America

To accommodate the increase need for refrigerated containers, industry leaders – like Maersk Line and Hapag-Lloyd, have made investments in their reefer fleet. Others, such as CMA CGM, have said they will add more reefer assets before the close of 2016.

reefers higher margin business

Shipping lines have been targeting the reefer sector because of its growth and because of its economies of scale. Reefers tend to be a higher margin business as there’s more value-add you can bring to the product offering and to customers. Shifting trade directions are also a factor. – Nigel Webster, Director of Refrigerated Containers, Seaco

Recent investment into reefer development has introduced new shipping options for the transportation of fruits and vegetables to/from markets like Florida, Mexico, Brazil, and Cuba. This increasing demand in emerging and developed economies will certainly bode well for carriers and container lessors alike.

Container lessors can provide a valuable service by bridging the gap between the need for new investment from cash-strapped container lines and the increasing need for more reefer boxes in the marketplace. This approach is more attractive to carriers because it allows them to hold their capital and reduce their exposure to additional operating costs. Investors are drawn to invest in containers because of the long-term benefits and lower risk.

reefer cargo means food always moves

Reefer cargo means food and food always moves. – Nigel Webster, Director of Refrigerated Containers, Seaco

Although Maersk Line is the biggest owner of reefer containers worldwide, the next four largest owners are leasing companies. In fact, of the 2.5 million reefer containers worldwide, leasing companies own approximately 42 percent of those assets.

Container leasing companies own 42 percent of reefers worldwide

Fact: Container leasing companies own 42 percent of the 2.5 million reefer containers worldwide.