Shipping container leasing has emerged as a popular investment option in recent years. As global trade continues to grow, the demand for shipping containers is increasing steadily. Container leasing provides investors stable cash flows while diversifying their investment portfolios. However, the cyclical nature of shipping industry also brings certain risks. This article analyzes pros and cons of container leasing investment through multiple perspectives.
Container leasing provides stable, recurring cash flows
Container leasing generates steady revenue streams as customers pay recurring leasing fees to use the containers. Market demand is strong due to growth in global trade and containers wearing out over 5-7 years of usage. Established players lease out their containers 5-7 times during the lifespan. This leads to predictable cash flows for investors.
Residual value risk is limited compared to other asset classes
Shipping containers have a lifespan of 12-15 years on average. Investors can fully depreciate the assets over tax-advantaged schedules. The residual value risk is low as steel scrap value provides floor pricing support. Containers also roll over into new lease terms easily if maintained properly.
Offers portfolio diversification with low correlation to financial markets
Historically, container leasing has shown minimal correlation to stocks and bonds. It provides attractive portfolio diversification for investors looking to minimize overall risk. Demand depends more on global trade rather than financial market cycles.
Requires large upfront capital and operations capability
The container leasing industry has high barriers to entry. Large upfront capital is required to invest in the steel containers which cost $2,000-3,000 each. Investors need capability to re-lease and re-position containers globally.
In conclusion, shipping container leasing offers stable yields to investors willing to commit sizable capital. Market demand is resilient due to growth in global trade. However, the sector remains cyclical and sensitive to downturns in the world economy.