Textainer’s Shares Reach an All-Time High as The Trend Continues

Even though freight rates and prices have gone down since the boom, several container industry names have done better than the market. Textainer which rents out tools that has to do with containers, is an example.

Textainer’s stock price just hit an all-time high since it went public in 2007. Its stock price is higher now than when COVID was popular.

Textainer CEO Olivier Ghesquiere talked about current trends in the liner sector on Tuesday. He did this based on how often the business talks to its clients, the shipping lines.

Recovery in Shipping Industry: Higher Ship Loadings and Firming Ocean Freight Rates

Ghesquiere stated that there are initial signs of higher ship loadings and firming ocean freight rates on major shipping routes. Cargo volumes have indeed started to recover over the past few weeks. August is expected to see additional ocean rate hikes, particularly on the trans-Pacific routes, due to the recent increase in ship utilization, leading to growing optimism.

The inventory destocking cycle is expected to come to an end soon, which will require us to replenish inventory before the winter holiday season. Our shipping line customers anticipate that cargo volume will pick up in the second half of the year.

Handling of Newly Built Container Vessels: Adding Ships and Slowing Down

Ghesquiere commented on the handling of a massive influx of newly built container vessels by his liner customers. The ships have already started arriving, which provides us with a good indication of what shipping lines are doing with them.

They are adding ships to their existing routes. They are typically operating 10 or 11 ships on a route. They are adding one or two more ships. They are also adding one or two more stops on the round trip. Additionally, they are slowing down the ships to consume less fuel and reduce CO2 emissions.

Increased Demand for Containers: Slower Ship Movement and Limited Production

The significant advantage for us is that when there is an increase in the number of ships in operation and they are sailing at a slower pace, it results in a longer duration for container movement. Consequently, this leads to a higher demand for containers. Larger container fleets will be required to transport the same amount of cargo.

Only a small number of Chinese companies make tools for containers. More than 90% of containers are made in China, and more than 80% of those are made by just three companies. During the epidemic, there was a big rise in the need for new storage bins.

Moderate Production and Low Ordering: Stabilized Container Prices

Ghesquiere stated that the industry was oversupplied during the COVID supercycle, but production has been more moderate for the past five quarters. He also expects ordering to remain low until the end of this year.

The price of new containers has fallen from the peak, but it has now stabilized at a fairly good level of $2,200 per CEU, which is the cost equivalent of a twenty-foot equivalent dry container. He said that at that price, it makes more sense for shipping lines to renew expiring leases than to order new boxes.

Minimal New Container Orders and High Utilization Rates

The orders for new containers have remained minimal, totaling only 650,000 CEUs so far this year. This is due to the industry’s ongoing efforts to handle the increased production volumes resulting from the COVID supercycle. The demand for leased containers is still there because shipping lines have very little incentive to shift away from renewing maturing leases.

In the second quarter of 2023, Textainer’s rate of using containers went down from 99.6% the year before to 98.8%. Ghesquiere stated that they are optimistic about the utilization rates remaining highly elevated until the end of the year and most likely into next year.

Textainer’s Financial Performance: Drop in Net Income and Record High Stock Price

Textainer’s net income dropped from $78.6 million in Q2 2022 to $51.3 million in Q2 2023. After making changes, earnings per share were $1.20. This was more than the average expectation of $1.15.

On Tuesday, the stock of the company ended at $42.75 per share, which was a record high. So far this year, the stock price is up 40%.

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