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Leasing versus ownership in the shipping industry by Syd Heal - Subscriber Access Only

By BCShippingNews 16 July 2015

Leasing v. Ownership is sometimes the source of problems of correct identification and understanding among the general public, including many in the investment field who shy away from the subject for want of a basic understanding. First, leasing is not new although it more commonly has been called long-term time chartering in the shipping industry. It was first adopted on a big scale by the international oil companies, who, in addition to owning big fleets of tankers, also topped up their needs by taking top-class tankers from private owners on term charters sufficiently long in duration to amortize the owner’s mortgage obligations. As more sophisticated relationships developed between owners (lessors) and charterers (lessees) many of these privately owned tankers were built to the oil companies’ specifications, sometimes with a purchase option in favour of the oil company to acquire the vessel at the end of the term. Over time, the oil companies have retreated from ownership so that in most cases the oil company now relies on the leasing or charter market for tankers for 100 per cent of their needs.

Photo above: Maersk’s Triple E (standing for Efficiency, Economy of scale and Environment) with a capacity of 18,000 TEU, was quickly surpassed as the largest container ship by CSCL and then by Mitsui-OSK. (Photo source: Maersk)