Individual Investments in Shipping Containers - Be Careful

Shipping container finance is a large industry that’s controlled by only a hand full of companies, and these companies are structured with both debt and equity to provide an optimal return to their investors. Who are these investors? Typically the investors are hedge funds, private equity firms, pension funds, or wealthy family houses. Despite what some companies will have you believe, it is highly uncommon for an individual to "invest" in a small number of shipping containers (small number being under 1000).

Shipping Container Investment Scams

Let’s start by addressing the current topic that has been circulating around the internet. There are a small number of companies operating out of South East Asia, and some currently showing up in London, that offer individual investors the opportunity to invest in as little as one container while getting up minimum return of 12%, and a maximum potential in the 30% range. This return is impossible. It was impossible when these companies started showing up several years ago, and even more impossible in today’s challenging market. Lease rates are falling, the price of new build containers has fallen, and the price of used equipment has also been forced lower (thus impacting the residual value of the equipment).

Also, these companies have a guarantee to repurchase the container at the end of the investor agreement for the original purchase price. While possible, this isn’t normal for the industry. Containers normally depreciate for 15-18 years to 40-60% of the original value, with the sharpest decline in the first five years.

If you do the math, a $3800 investment earning 12% annually would be paying $456 in interest, or $1.26/day. That amount alone is dramatically higher than the lease rates paid by any major shipping line.

How to Tell If you’ve Been Scammed

Keep in mind that container leasing companies aren’t banks, and therefore aren’t regulated by any international body. First off, check if the company that you invested is really a registered company. At the time of this article, the company in London was no longer an active company, it had been dissolved a few months back.

Second, do you have the prefix number for "your" containers? The prefix number is similar to a vehicle identification number. Any seagoing container has a prefix that it can be tracked by. The prefix will be four letters, the last one always being a "U" and seven numbers, the last one being a "check digit". This prefix will tell you the name of the company managing your container. If you don’t have this number, you can probably stop reading here and collect your losses.

General Knowledge: Industry Structure

Shipping lines own a portion of their container fleet, and lease the balance. Leases provide them with the flexibility to shrink or grow their fleet to meet demand. Leasing also provides them the ability to free up capital and invest in other container vessels.

Container leasing companies are structured with both equity and debt. The banks that provide the debt require set ratios directly tied to their equity, so taking on hundreds of equity investors would greatly limit their earnings. Container lessors also make money on volume. Once the infrastructure is in place to lease one container, they can lease thousands of containers. With no offense to the small investor, it would be incredibly taxing on the accounting department to process interest payments for hundreds of investors that each own one or two containers.

ContainerAuction.com is not a leasing company, nor do we provide financial services of any kind. CoontainerAuction.com is an online marketplace that shipping lines and lessors use to buy and sell all sizes of shipping containers.