The Zhitong Finance App learned that with the gradual recovery of the global economy, demand in the shipping market is strong, and new shipbuilding prices have soared to the highest level since 2008, opening the beginning of a new supercycle in the shipbuilding industry. Continued new orders and extended order schedules are footnotes to the current “boom” situation in the domestic shipbuilding industry. Industry insiders said that under the impetus of the expiration of ship age and new environmental protection policies, domestic ships' technological investment and continuous improvement in product competitiveness are driving China to accelerate its progress from a major shipbuilding country to a shipbuilding power.

On March 28, the China Shipbuilding Industry Association revealed the latest statistics, showing the strong development momentum of China's shipbuilding industry in the first two months of this year. According to data, in the first two months of this year, the country's shipbuilding completed volume was 8.26 million dwt, an increase of 95.4% over the previous year, of which export ships accounted for 92.5% of the total; the number of newly accepted ship orders was 15.2 million dwt, an increase of 64.4% over the previous year, of which export ships accounted for 90.7% of the total. By the end of February, orders for hand-held vessels in China were 149.19 million dwt, an increase of 31.3% over the previous year, with export vessels accounting for 91.8% of the total. Seemingly, the shipbuilding industry's order boom continues, and the global supply chain has yet to stop being “crazy.”

On the eve of the Spring Festival, China Heavy Industries announced that Dalian Shipbuilding Industry Group Co., Ltd., a wholly-owned subsidiary, has each signed a number of new very large tankers (VLCCs) with two well-known European shipowners, including 6+2 convention-fuel VLCCs and 4+2 LNG dual-fuel power VLCCs. The total contract amount is close to 1.8 billion US dollars, and delivery will begin at the end of 2026.

In December of last year, China Shipping announced that its wholly-owned subsidiary Shanghai Waigaoqiao Shipbuilding Co., Ltd. and its holding subsidiary Guangzhou Shipbuilding International Co., Ltd. signed new shipbuilding contracts with the two shipowners for a number of 10,800 LNG dual-fuel vehicle carriers, with a total amount of about 1.46 billion US dollars. According to its third quarter results briefing held in the same month, the company's order schedule has reached the end of 2027.

At the same time as orders have surged, orders placed during the pandemic have also ushered in an intensive delivery period this year. According to information, during the epidemic, a large number of ships and containers were stranded in major ports, causing overall global capacity constraints. It also directly caused shipping costs to soar all the way up, quickly inspiring shipowners' enthusiasm for investment. Generally, the construction cycle of a ship takes 2 to 2.5 years. This also means that orders placed centrally after 2021 will be delivered one after another around 2024. This cycle has kept the shipbuilding industry busy even after shipping costs fell back from a high level in the second half of 2022.

Furthermore, the expiration of ship age+new environmental regulations are driving a new round of replacement demand. According to the SDIC Securities Research Report, 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 to 25 years, a new rotation cycle has already begun. According to data from UNCTAD (United Nations Conference on Trade and Development), 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 the perspective of carbon reduction, 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”.

Southwest Securities released a research report saying that looking forward to the future, China's shipbuilding industry will continue to maintain its growth momentum and strive to catch up with the current technological gap. The proportion of green, mid-range and high-end ships has increased markedly, breakthroughs have been made in new product research and development, and transformation and upgrading have achieved remarkable results. At the same time, global shipyard production capacity has been tightened, and ship prices have changed to demand pricing rather than supply pricing. We are optimistic about the profitability of Chinese shipyards in the new shipbuilding cycle.

China Investment Securities released a research report saying that reviewing the shipbuilding 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”: the production capacity dividend of “new ship orders are concentrated at the head” after the global supply side clears up, the current price dividend of “supply

Related concept stocks:

China Shipbuilding (600150.SH): The company disclosed an advance announcement for its 2023 annual results. It is expected to achieve net profit attributable to owners of the parent company in 2023 between 2.7 billion yuan and 3.2 billion yuan, an increase of 1470.95% to 1761.87% over the previous year. Net profit attributable to the owner of the parent company after deducting non-recurring profit and loss is expected to be between 500 million yuan and 0 yuan in 2023.

China Ship Leasing (03877): At the beginning of April, Guotai Junan released a research report stating that maintaining China's ship leasing “increase” rating, profits grew steadily in 2023, which was basically in line with expectations. Net profit forecast for 2024-25 is HK$2,22.4 billion, with an additional 2026 forecast of HK$2.6 billion, with a target price of HK$2.06 billion. The company is committed to procyclical operations, and it is expected that profit sustainability will exceed expectations. The dividend rate is beginning to rise. Orders may continue to be placed cautiously in the next few years, and the dividend rate is expected to gradually increase.

COSCO Maritime Control (01919): On the evening of March 28, COSCO Maritime Control announced its 2023 annual results. As of the end of the reporting period, COSCO Maritime Control's self-operated container fleet was 502 ships, with a capacity exceeding 3.04 million TEUs, ranking first in the industry in terms of fleet size. In addition, the company still has 37 new shipbuilding orders, with a total capacity of nearly 730,000 TEUs. In April, Goldman Sachs released a research report stating that it maintained COSCO Maritime Control's “sale and sale” rating and raised the 2024 and 25 net profit forecasts by 108% and 3% respectively to reflect the increase in spot freight and contract freight, but the cost increase caused by the interruption of Red Sea Freight partially offset this effect, and the target price was raised from HK$6.7 to HK$6.8. According to the report, the company's profit last year was in line with expectations. During the period, net profit fell 78% to RMB 23.9 billion, which meant that net profit for the previous quarter was 1.8 billion yuan, down 85% year on year, and 68% quarterly. The bank mentioned that the group's container transportation business only achieved break-even in the last quarter. Management also emphasized that the company's strategic focus will be on supply chain services, and South America may be a promising market.

Intercontinental Shipping (02409): Recently, the company issued an announcement. On March 15, 2024 (after the Stock Exchange trading session), the buyer Seacon Shipping Pte. Ltd. (an indirect wholly-owned subsidiary of the company) entered into a shipbuilding contract with the seller Wuhu Shipyard Co., Ltd., according to which the seller agreed to build a ship for the buyer at a cost of US$30.1 million.

China Shipbuilding Defense (00317): The company is a large-scale comprehensive marine and defense equipment enterprise group integrating four major marine equipment: marine defense equipment, marine transportation equipment, marine development equipment, and marine science and technology application equipment.