The Zhitong Finance App learned that SDIC Securities released a research report saying that reviewing the shipping industry cycle and analyzing the global pattern and cycle rhythm, the bank believes that the dominant driver of this ship cycle is mainly the Jugra cycle accelerated by “green power”. Currently, it is in the “sharp rise in volume and price” stage in the early stages of the cycle. In 2024, leading shipping companies will fulfill the “dividend trio”: “New ship orders are concentrated at the head” after the global supply side is cleared, and the current “” price dividend; “both volume and price are high; However, the profit dividend of “operating at a low cost of steel”.
SDIC Securities views are as follows:
The supply side is clear, and China's shipbuilding industry invigorates “LNG ships+green ships”
On the supply side, since 2008, the shipbuilding industry has gone through many years of supply-side clean-up. Global shipbuilding production capacity was concentrated in China, South Korea, and Japan. The total shipbuilding volume of China, South Korea, and Japan in 2023 was revised to account for 89% of the total tonnage. Among them, in particular, the Chinese shipbuilding industry showed a remarkable transformation trend from a “big country” to a “powerful country”. According to data from the China Shipbuilding Industry Association, 25.89 million new ship orders were signed in 2023, accounting for about 60% of the global share. Compared with 50% in 2022, rapid green power orders such as LNG and methanol growth, ammonia fuel reserves, hydrogen Orders for zero-carbon ships such as fuel cells have made a breakthrough, and the international market share of new green ship orders has reached 57.0%, achieving full coverage of mainstream ship types.
“Green power” accelerates the Jugra cycle, when the ship replacement cycle is underway
The shipbuilding industry has obvious cyclical characteristics. The peak period for the last round of shipbuilding was around 2000 to 2011. Considering the average lifespan of ships of 20-25 years, a new rotation cycle has already begun. According to UNCTAD data, in 2023, about 12.5% of the global fleet will have an average age of more than 20 years in terms of cargo tonnage. Among them, oil tankers are aging seriously. From a carbon reduction perspective, in 2023, the IMO formulated a strategy to achieve net zero emissions in the global shipping industry by 2050. The development trend of green power is irreversible, and it has become an important new driving force for this “ship cycle”.
The seller's market volume and price are both high and steel costs are low. Shipping companies' profits are expected to rise at an accelerated pace
The supply of shipbuilding production capacity is tight and demand is strong. Under the seller's market, orders for new ships are concentrated, and some are already scheduled until 2028; on the price side, ships' bargaining power is high, and the global new shipbuilding price index continues to be high; on the cost side, the price of steel plate, which has a large impact on raw materials, has fallen back from over 7,000 yuan/ton at a high in 2021 to a historical center level of more than 4,000 yuan/ton. In 2023, the gross profit margin of the shipbuilding business of Yangzijiang Shipbuilding, a leading domestic private shipbuilding company, was 22%, compared with +9pcts, mainly benefiting from the high price of new ships and lower raw material costs. As a result, the bank expects domestic listed shipping companies to enter an upward channel of accelerated profits in 2024.
Investment advice:
Empowered by long-term carbon reduction targets, the Jugra cycle of current ships is still in its early stages. The degree of aging stock capacity is still high, and the development trend of “green ships” is irreversible. Continuing to be optimistic about this major cycle in the shipbuilding industry, it is recommended to pay attention to:
1) Shipbuilding leaders that are expected to benefit from the three major dividends of shipbuilding production capacity, new ship prices, and steel costs: China Shipbuilding (600150.SH), China Shipbuilding Defense (600685.SH), and China Heavy Industries (601989.SH);
2) Marine power system leader that is expected to benefit from the industry's large cycle: China Power (600482.SH).
Risk warning: Macroeconomic risks fall short of expectations, raw material prices and exchange rates fluctuate, and environmental policies fall short of expectations.