Shipbuilding industry leading enterprises, through the cycle ushered in the dawn

New orders this year have shown a rebound trend. In particular, the new orders in March this year were 22.42 million deadweight tons, and the order value was $16.7 billion, both indicators were the highest values since January 2014.

At the same time, the cost of new orders of ships is also continuing to increase. The price of new shipbuilding orders has continued to rise since the end of last year, and the new ship price index as of October this year has increased by 21% compared with the end of last year, and the second-hand ship price index has increased by 95%. From the perspective of various ship types, container ships, bulk carriers and oil tankers increased by 26%, 30% and 24% respectively compared to the end of last year.

We judge that the current shipbuilding cycle is in the bottom up stage.

In recent years, the trend of capacity growth has slowed down, the order in hand has been declining, and if there is a marginal improvement in demand, the demand for new orders is strong.

In addition, the average distance transported per ton of cargo has shown an increasing trend in recent years. We calculate the average distance per ton of goods by dividing the volume of traffic by the volume of trade. We can see that the average distance per ton of goods has shown an upward trend since roughly 2009, which may be due to the overall increase in the proportion of trade between countries in the world and countries that are farther away. Another possible reason is a reduction in the amount of cargo carried on average per ship. If the trend of increasing average distance per ton of cargo continues, the demand for fleet capacity will increase, other conditions being equal.

(3) The demand for fleet renewal emerges, and environmental protection requirements catalyze the elimination of old ships

As the average age of the fleet increases, the need for replacement emerges. Container ships increased in particular, the average age of global container ships in November 2021 was 13.4 years, the highest value since the data were collected in 2005, and the remaining two mainstream ship types have also been in the long-term rise channel since 2011. The gradual increase in the average age of the fleet will create a continuous need for renewal in the future.

In recent years, the demand for environmental protection has been increasing, which has played a boosting role in the modification and upgrading of the original ships. The environmental pollution caused by the shipping industry has been highly concerned by the international community, the International Maritime Organization (IMO) has been committed to promoting the greenhouse gas emission reduction work of the shipping industry, and constantly formulate and introduce mandatory regulations to prevent environmental pollution from ships. At present, ships mainly rely on fossil fuels, and it is expected that the number of replacement ships required to meet environmental requirements in the future will be large. In addition, the Marine ecological environment issues put forward new requirements for ships. In 2004, the International Maritime Organization (IMO) adopted the International Convention on the Control and Management of Ships' Ballast Water and Sediments, which was officially implemented on September 8, 2017, and ships built since then must be delivered with a Ballast water treatment system (BWMS) and meet the D-2 standard. The increasing demand for environmental protection has helped the development of the company's shipbuilding and ship repair business.

Third, the ship market has three pillars, and Chinese ships play an important role

(1) China's shipbuilding strength has been enhanced, and many indicators rank first in the world

The ship construction market is becoming concentrated in the top countries, and China's share has increased significantly. From the perspective of countries, the number of new orders and the proportion of deadweight tons in the world showed a trend of substantial growth in China, slight growth in South Korea, and gradual contraction in Japan, of which China's proportion increased from less than 10% in 1996 to half of the country in 2021.

However, in terms of order quality, there is still a big gap between China and South Korea. Since 1996, the average load and average price of new orders in the global ship market have risen to a certain extent, but the corresponding indicators of new orders in China are still relatively low, and the gap between South Korea and China has not narrowed. By 2021, China's new ship orders will average 72,800 DWT/ship, with an average value of $54.33 million/ship.

The overall competitive pattern of the leading ship enterprises is consistent with the overall national pattern. Taking China, Japan and South Korea's respective head shipping companies CSSC, South Korea's Hyundai HI Group, and Japan's Imabari Shipbuilding as an example, the delivery capacity of China and South Korea's shipping companies has been significantly ahead of Japan's Imabari, and from the perspective of China and South Korea, In recent years, the number of orders delivered by CSSC has exceeded that of Hyundai in South Korea, but because the average load of shipbuilding in China is lower than that in South Korea, the load excess of orders delivered is relatively small.