| Lease Type |
Duration |
Repositioning |
Maintenance and Repair |
Other Issues |
| Master Lease |
Short to medium term |
Leasing Company |
Leasing Company |
Variable number of containers (min/max). Variable
lease duration. On hire and off hire credits/debits (depending on location
and equipment condition). |
| Long Term Lease |
5 to 8 years |
Lessee |
Lessee |
Fixed number of containers. Predetermined delivery
schedule. |
| Short Term Lease |
Short period / trip / round trip |
Lessee |
Lessee |
|
Source: adapted from S. Theofanis and M. Boile (2009) "Empty Marine Container
Logistics: Facts, Issues and Management Strategies", Geojournal, Vol. 74, pp.
51-65.
Characteristics of Container Leasing Arrangements
Leasing a container is more costly than ownership from an operational standpoint,
about 60% to 70%. Still, there is a large leasing market with about 40% of the
global fleet of containers is owned by leasing companies. This confers flexibility
and some leasing arrangements enable the lessee to leave the container back to
the leasing company at its destination. If there is a surge in the demand, a carrier
can lease containers instead of buying them, particularly if the surge is expected
to be temporary. Leasing arrangements come into three major categories (Theofanis
and Boile):
- Master leases. They are also called full service leases or container
pool management plans and involve a complex and comprehensive leasing arrangement
where the leasing company assumes full management. This entails a set of conditions
regarding the availability of containers and an accounting system including
debits and credits between contracting parties depending on the condition of
equipment at the time of interchange. The leasing company is responsible for
the full management of the container fleet (maintenance and repair) and for
repositioning following off hire and contract termination. In many ways the
leasing company acts as a logistics service provider since it must allocate
the distribution of its container assets in view of the transportation strategies
of the lessee. Thus, it must insure that an adequate supply of empty
containers is made available for their customers as pick up
locations.
- Long term lease. Also called dry leases and are commonly associated
with the extended use of the leased container by an ocean carrier. This lease
normally follows the purchase of new containers by the leasing company and they
do not involve any management service by the lessor. The goal the leasing company
is to amortize its investment over the lease period which covers about
half of the useful life of a container.
- Short term lease. Also called spot market leases since the lease
price is strongly influenced by current market conditions pertaining to the
volatility of supply and demand. Such arrangements commonly take place when
there is a temporary surge in the demand, either cyclical or unforeseen. Because
of its volatility leasing companies try to avoid having a large share of their
equipment on the spot market because of the risk of having idle containers,
but realize that such a condition is unavoidable. Still, with careful planning,
containers can be positioned to take advantage of local or regional surges in
demand.
The recent trend has involved a shift from master leases to long term leases,
particularly because of acute imbalances in containerized trade flows, such as
between Pacific Asia and North America, which required the long distance repositioning
of empty containers. Under a master lease agreement, these repositioning costs
have to be covered by the lessor. With a long term lease agreement, repositioning
is assumed by the lessee. Leasing a container costs between $0.60 and 0.80 per
TEU per day depending on local conditions of supply and demand.