The ship cycle starts, and the structural upgrade is good for the domestic head ship enterprises

First, the renewal of old ships combined with environmental protection needs has spawned a new round of ship cycles

1.1 The aging of ships drives a new round of demand for capacity renewal

The age of the ship continues to rise, bringing the replacement demand of the old ship. Since the last round of ship delivery peak, the average ship age of global ships has gradually risen since 2011. According to Clarksons data, as of August 2023, the average ship age of container is the highest, 14.23 years, followed by Tanker. The average age of a ship is 12.46 years, and the average age of a Bulkcarrier is 11.75 years, which is the lowest among the three ship types. From the perspective of fleet age structure, the proportion of global fleet aged 0-5 years has gradually decreased since 2013. Since the beginning of 2018, the proportion of ships over 16 years old has gradually increased. As of March 23, the shipping capacity of 16-20 years old accounted for 15.16%, and the shipping capacity of more than 20 years old accounted for 12.33%. It is expected that the number of ships to be dismantled will increase in the future, and the demand for new shipping capacity will gradually increase.

According to the statistics of the service life of shipbreaking in the past 3 years, the average service life of ships is about 32 years. According to SSI, the average service life of a ship can reach 30-50 years, but without continuous and adequate maintenance, repair and modification, the ship's life is difficult to reach this level. In addition, excessive age of the ship will also bring a series of navigation safety hazards and the increase of insurance costs. Therefore, the actual service life of the average ship is 25-30 years. According to the service life of ships dismantled in recent years, the average service life of ships is about 32 years. In addition, the service life of the same ship type will fluctuate dynamically under different historical freight levels. When the freight rate is at a historical high, the ship owners tend to delay the decommissioning of the ship. Looking at the service life of ships dismantled in the last three years, the average life of LNG is as high as 37 years, while the average life of Capesize Bulker is lower, at 24 years.

In history, the ship cycle generally has a large time span, with an upward period of about 23-28 years and a downward period of about 10 years. Since the 20th century, the world ship market has experienced four distinct cycles: During World War I and World War II, the war's demand for ship renewal iteration was the direct cause of the first two cycles of shipbuilding; After World War II, the global economy recovered, while the ships built during World War II gradually aged, and 1967 coincided with the closure of the Suez Canal. Multiple factors promoted the global shipbuilding industry in 1970-1975 ushered in the third upward cycle, but under the influence of the first oil crisis turned from prosperity to recession. At the end of the 20th century, the rise of the four Asian Tigers, China's accelerated opening up process, and the updated and iterative demand for ships built in the 1970s led the global ship market to enter a new round of prosperity cycle, but this extremely prosperous period came to an abrupt end under the impact of the 2008 financial crisis. Due to the delayed nature of completed deliveries, 2011 was the highest year in history for ship completions, with global completions reaching 167 million deadweight tons (dwt), which represents the load capacity that ships can use in operation, and since then completions have declined significantly. Based on the statistics of the ship cycle and the average dismantling life of ships, we find that the average life of ships is close to the time of an upcycle, and the replacement of ships is likely to be one of the underlying factors driving the shipbuilding cycle.

Although the total volume of global seaborne trade fluctuates annually, it basically expands at a compound growth rate of 3%. World Seaborne Trade reflects the world's major economic and trade transactions, in which the larger volume of trade is mostly for the stable demand of commodities. Take 2022 as an example: oil and gas (crude oil, refined oil, LNG, LPG) trade volume accounted for 30%, dry bulk cargo (mainly iron ore, coal, grain) trade volume accounted for 44%, container trade volume accounted for 15%. Thus, while the volume of global seaborne trade fluctuates in response to the economic cycle, the amplitude is small. Considering that tonne miles can better reflect the demand for shipping capacity, taking the data from 2000 to 2022, it can be found that the total volume of seaborne trade has maintained steady growth in the past 22 years, maintaining a compound growth rate of about 3%.

From the point of view of the annual delivery of new ships, the last round of shipbuilding cycle started in 1989, it has been 34 years, more than 28 years of average ship service life, looking forward to the number of over-age ships facing dismantling will increase rapidly year by year. According to a report by the Baltic Sea International Chamber of Shipping (Bimco), "Over the next ten years from 2023 to 2032, it is expected that more than 15,000 vessels with a deadweight tonnage of more than 600 million tons will be recovered." According to Bimco analyst Niels Rasmussen, this is more than double the amount recycled in the previous decade. At the same time, from the perspective of idle ships, the idle number of bulk carriers and oil tankers delivered in the last round of shipbuilding cycle reached a high point in 2016 and 2015, respectively.