Analysts looking for data that indicate the current shipping industry boom cycle peaked at the start of 2022 will be interested in container leasing giant Triton International’s Q1 2022 financial results. Data from Triton show that new container prices peaked at the end of 2021 and have since come back to just below US$3,000 for a standard 20ft dry container.

Container factory inventories are still below normal levels of around 2.5% of the dry container fleet total, but rose from below 0.5% in early 2021 to around 1.5% in Q1 2022. There is more inventory in the market, and container leasing rates have fallen. “As we’ve seen, the market came from really unprecedented, shortages of containers to just tight. The premiums that the factories can charge for getting access to their capacity has come down. And that’s reflected in lower market leasing rates,” said Triton CEO Brian Sondey.

Although the container leasing market has come down, it is still at a very high level – July 2021 was a definitive peak. In 23 years with Triton “I had never seen container prices at where they are today, until 2021”, Sondey said.

At that time container prices were approaching $4,000 and Triton was signing 12 and 13-year lease contracts. Now that price has come back under $3,500 most of the new deals are on 10-year contracts. This is still a very strong position for a leasing company – “there’s been no other year in my history, where we’ve done 10-year leases as the norm,” Sondey stressed.

More normal market factors have also returned to customer negotiations. Reflecting on 2021 Sondey said “there were certainly a few quarters there where we were more capped by relationship reasons than ability to get the deals done just because the boxes were needed so badly by our customers and the customers of our customers. Now it’s much more of a regular market, where multiple leasing companies can supply containers to the increases that are out there.”

Operating in this “regular market” Triton is delivering a high level of profitability. Its container fleet utilisation averaged 99.6% in the first quarter of 2022 and stood 99.5% as of April 29, 2022. The company categorised this as “exceptionally high”.  Revenue in Q1 2022 was up 20% year-on-year to $417.1M. Adjusted net income for Q1 2022 was $179.6 million, or $2.76 per share, an increase of 3.4% from the fourth quarter, and nearly 45% from Q1 2021.

Triton has moved quickly to adjust to changing market conditions. “We moderated our investment pace in the first quarter after record levels of investment and growth last year. Our shipping line customers aggressively added to their container fleets throughout 2021 to accommodate strong trade volumes and mitigate the impacts of logistical bottlenecks. They have so far been more cautious about adding further container capacity in 2022, though container drop-off volumes have remained very low. As of April 29, 2022, Triton has ordered $428 million of new containers for delivery in 2022, Sondey said.

While the container shipping market appears to be coming off a peak, Sondey expects Triton’s performance “will remain very strong in 2022 due to the durable enhancements we have made to our business, and we have many levers to drive shareholder value across a wide range of market conditions. Our adjusted net income per share in the second quarter will likely decrease slightly from our record results in the first quarter, especially if used container sale prices and gains continue to normalise. But overall, we expect our profitability and Return on equity will remain very high throughout the year and into the longer term.”

With regard to inflation that such a concern in global markets today, Sondey noted that inflation actually creates value for Triton as the value of its containers increases, whereas the purchase of those assets is financed “primarily with nominal debt with fixed interest rates.”