China's leading ship enterprises enjoy the dividend of share improvement and structural upgrading

In the past 21 years, the proportion of new orders undertaken by Chinese ships has increased significantly, and the proportion of high value-added ships has increased significantly. In terms of CGT, China's new ship orders in 2012 reached 27.8 million CGT, an increase of 142.78%; China accounted for 50.1% of the world's new ship orders, up 6.6pct year-on-year. In 2013, the repair load ratio of China's new ship orders reached 0.468 (revised gross ton/deadweight ton, which is obtained by the total ship cargo multiplied by the ship type coefficient, taking into account the difficulty coefficient of ship construction), which is the best level in history, indicating that China's new ship orders have a clear trend of high-end.

From the perspective of ship type: in terms of CGT, the proportion of gas vessels in China's new signed orders gradually increased, especially in 22 years, significantly increased to 22.66%, an increase of nearly 20pct; In 22 years, the new orders of Chinese shipyards for tankers, bulk cargo, containers and gas vessels accounted for 32%, 60%, 55% and 32% of the relevant global markets respectively. The share of container ships and gas vessels increased significantly compared to the previous cycle. In terms of the number of vessels, the new orders signed by China's three types of high value-added vessels have shown an upward trend since 2017, rising from 28 to 163 in 22, accounting for the world's relevant market share increased from 13% in 16 to 44% in 22. It is worth noting that in the field of LNG carriers, according to the statistics of the China Shipbuilding Industry Association, in 22 years, China's new LNG carrier orders reached 4.81 million CGT, an increase of 480% year-on-year, hitting a record high. China's market share has grown from 12% in 2021 to over 30%. Among them, large liquefied natural gas (LNG) carriers made a great breakthrough, and undertook 55 large liquefied natural gas (LNG) carriers with 174,000 cubic meters of orders. In the VLCC field, the only two VLCC orders in the world in the whole year of 22 were all undertaken by Dalian Shipbuilding Industry Co., LTD., a subsidiary of China Shipbuilding.

From the perspective of shipyards: in 22 years, China's LNG carrier orders have rapidly expanded from 1 to 5. Experts in the shipbuilding industry believe that as more and more Chinese shipping companies enter this field, it will drive the development of the entire industry chain, and China's competitiveness in the competition for high-end ships market will also be enhanced. We believe that as Chinese shipping enterprises accelerate the layout of the high value-added ship market, core technology breakthroughs, and the improvement of the shipbuilding industry matching rate, China's shipbuilding industry is expected to improve its competitiveness in the field of high value-added products and obtain higher market share.

The concentration of the shipbuilding industry and the barriers to entry have increased from the previous cycle

3 The shipbuilding industry has experienced more than ten years of reshuffle, and the concentration of the supply side has been greatly improved

In the last round of the downward cycle, the global shipbuilding industry has serious overcapacity, and the merger and reorganization of shipbuilding enterprises has become a trend, and the concentration of the global shipbuilding industry has increased significantly. After the 2008 financial crisis, the global shipbuilding industry mainly contracted and optimized its capacity through bankruptcy liquidation and merger and reorganization. Among them, from 2012 to 2016, the capacity adjustment of the shipbuilding industry was mainly based on shutdown, bankruptcy and liquidation, and gradually spread from small and medium-sized enterprises to large shipbuilding enterprises. From 2016 to 2020, the adjustment of the shipbuilding industry will shift to the merger and reorganization of large and medium-sized enterprises, including the acquisition of high-quality shipyard assets by advantageous enterprises and the merger and reorganization of large enterprise groups, such as the acquisition of Daewoo Shipbuilding, one of the three largest companies in South Korea, by the Korean military giant Hanwha Group in 2023; In 2013, Imaji Shipbuilding acquired 30% of JMU's shares and established a joint venture sales and design company "Nippon Shipbuilding" with JMU. From the perspective of the number of active shipyards in the world, the number has shown a significant downward trend after 2008, from 1023 in 2008 to 355 in January 23. From the perspective of hand-held order share, as of July 2023, the top ten shipbuilding groups have a 73.5% share of global shipbuilding orders, an increase of 34.6pct compared with 2010, indicating that the concentration of the global shipbuilding industry has increased significantly.

In the past decade, in the context of the overall sluggish demand in the international shipbuilding market and the global shipbuilding overcapacity, China's shipbuilding industry has implemented supply-side structural reform, and the number of active shipyards in China has dropped significantly and the concentration has gradually increased. From the perspective of shipbuilding enterprises, the number of active shipyards in China reached a maximum of 455 in 2008, and then showed a sharp decline trend, to 155 in January 2023, a decrease of 66%; The CR10 of Chinese shipbuilders in 2010 increased from 35% in 2009 to 51% in 2022. From the perspective of shipbuilding groups, since 2016, COSCO Group and China Shipping have implemented restructuring, during the same period, Sinotrans Group has been integrated into China Merchants Group as a wholly-owned subsidiary, and in 2019, CSSC and CSIC have implemented joint restructuring and newly established China State Shipbuilding Group. The scale advantage and synergy effect brought by merger and reorganization are significant. At present, the hand-held orders of the three central enterprise shipbuilding groups account for 53% of the total domestic orders (in CGT), and the concentration of the domestic shipbuilding industry has reached a high level.