The container leasing industry has been caught in a mess of powerful market forces for some time, as consumer demand has dropped and port volumes have melted away worldwide. Now, with the economic situation still on the slide, it seems that “bigger is better” will become the new maxim for survival.At the end of 2008, only one man seemed to have a smile on his face – John Maccarone, the CEO of the world’s largest container lessor, Textainer, who said that 2008 had been “a very good year” for the industry.

Maccarone made two predictions for 2009: first, that further traffic and rate slumps would prompt capex reductions for all the major lines, raising leasing penetration among box fleets despite dwindling volumes. Secondly, that intense consolidation would ensue, as – in his words – “less well financed leasing companies will look for bigger partners.”

Unsurprisingly, he wasn’t wrong. Analysts at Morgan Stanley have predicted a 3 percent reduction in global container traffic this year, which takes into account the continued (though much reduced) growth of Chinese port traffic.

For European and American ports, as evidenced by the 30-40 percent reductions reported from North American terminals on the continent’s west coast, the situation is grave indeed.

Maccarone’s second point was proved by Textainer’s acquisition of the management rights to the 150,000 strong 20ft TEU fleet of Amficon, the largest container lessor both owned and operated from the UK, bringing total fleet size up to 2.2 million.

In addition, the Amficon fleet provided Textainer with a significantly increased fleet of specialised flat rack and open top containers, allowing the American company to entrench itself in more areas of the shrinking shipping market.

Basil Henley, managing director of Amficon and veteran of the container lease industry since the company’s inception in 1972, said that Amficon had sought out the deal, and stood to benefit greatly from economies of scale as a result of partnership with Textainer, which reportedly has €230 million of liquidity behind it.

When asked about the possibility of further industry consolidation, Henley said he was “convinced” that several more acquisitions were on the cards before the leasing market reached equilibrium with atrophied shipping routes.

Other big box lessors seem to be tackling the situation through bulking up too. Late last year, Florens Container Holding, the container leasing subsidiary of the East Asian Cosco Group, increased its fleet size by 6.7 percent to reach 1.6 million units – even though this represented a gearing down from 2007’s 21.5 percent growth.

Meanwhile, other players are looking for a market exit: Shipping bank HSH Nordbank announced last month that it would wind down its container leasing operation, as part of a reduction in business that may see 1,100 jobs lost and the banking group’s asset base of €115 billion cut in half.

The container business has a standing portfolio of around €800 million, and is part of the group’s transportation unit, which holds around €13 billion in assets divided between aviation, infrastructure and rail sectors.

Global head of transportation Mathis Shinnick said the container leasing division had been “a good business”, but that no new contracts would be written and that HSH Nordbank would be making “a gracious exit” from all but a few key client relationships.

As the year progresses, the container lessors to watch with interest will be those – like Amficon – whose fleets would provide a strategic advantage to a larger competitor, and who would benefit from the security of economies of scale.

Contributed by: Fred Crawley, Reporter – Leasing Life & Motor Finance