The woes of the container leasing industry

Keeping leased and owned containers in proper balance is vital to the success of ocean carriers. Despite the long‐running debate about the advantages of renting versus ownership, the leasing industry had retained control of a relatively stable share of global container fleet before 2004. However, lessors' initial cash investment return (ICIR) generated from new‐build dry freight leases has been falling inexorably over the period of study (1992‐2008). By assuming perfect substitution between owned and leased containers in container shipment, this paper finds that the Leontief cost functions is a good model in explaining leasing industry's long‐run decline in ICIR.