The business models behind container leasing in maritime freight market

“However, this is not the situation that shippers witness when they move between smaller stretches that aren’t crowded – say between Jakarta, Indonesia, and Colombo, Sri Lanka. In such stretches, it would be harder to find a big shipping line and reasonably priced containers,” said Frese.

The general rule of thumb suggests that shippers should look to use a COC when the point of return has an equal number of exports compared to its imports. For instance, the port of Shanghai with a lot more exports than imports would be an attractive point of return for shipping lines, and thus an ideal situation for shippers to use COC.

However, if the point of return is the port of Colombo, it would make the corridor unattractive to carrier lines because the number of imports outweighs the number of exports – thus exponentially increasing COC costs. Slower customs processes at remote ports may also bring detention and demurrage charges, which will increase a shipper’s costs.

This makes COC, albeit an easy procedure on paper, a complicated and at times an expensive process. On the other end of the spectrum is the SOC. Though SOC is not as convenient as a COC, it makes up for it by being a flexible business model where trade conditions and corridor specifications have no bearing on its availability and shipping rates. SOCs are traditionally used by freight forwarders, beneficial cargo owners (BCOs), and non-vessel operating common carriers (NVOCCs) that usually own or organize a container, while hiring shipping lines separately to move the freight.

“The benefits of using a SOC is that you control the containers and thus can escape issues arising out of container ownership as with the COC model. That apart, you can also avoid unexpected demurrage and detention costs as you are not obligated to move or return the containers to the carrier within a certain time frame,” said Frese.

xChange goes a step further in the SOC leasing process by aggregating hundreds of container owners across the globe, and providing the capacity to shippers who can lease out containers at the click of a button on the xChange platform. “Our users will only have to type in their pick-up and drop-off locations, and our system generates a list of potential partners. Users can connect with them for the containers, get visibility over the whole journey, and even have the option of adding third-party services like insurance to the process,” said Frese.