The 20-year ship cycle is expected to enter a new upward stage

In summary, the international situation is generally stable, the global economy is growing rapidly, the shipping volume is growing rapidly, the shipping rate continues to run at a high level, the shipowners have accumulated a large amount of booking funds, and the second-hand ship trading activities are active, which will gradually be transmitted to the new shipbuilding market, thus promoting the prosperity of the new shipbuilding market. At the same time, global economic fluctuations and declines, war and other factors will make the ship cycle face a decline in demand.

We further detailed the specific analysis of the last upward cycle (2002-2010) of new orders and shipbuilding prices, we can find that the shipbuilding industry will experience relatively obvious four stages: volume price rise, volume parity rise, volume price rise and volume price decline. 1) Stage 1 (volume and price rise) : 2002 is the starting point of the cycle recovery of the ship industry, thanks to the early stage of the cycle recovery, shipbuilders have flexibility in their own production scheduling, shipbuilders can increase the number of new orders according to their own capacity, and ship orders appear volume and price rise. 2) Stage two (volume reduction and rise) : With the order capacity schedule more full, the shipyard orders are relatively full, shipbuilders in the no clear expansion plan under the order is more cautious, began to enter the single stage, although the order volume growth began to decline, but the shipbuilding price still maintains an upward trend. 3) Stage 3 (volume price leveling) : Around 2006 began to enter this stage, the second stage of shipyard expansion capacity began to further release, with downstream demand upward, the industry as a whole into a more balanced supply and demand volume price stability stage. At the same time, if the growth rate of the demand side is still much higher than the growth rate of the supply side at this stage, the corresponding new orders will also show a small price increase. 4) Stage four (volume and price decline) : The downward cycle ship demand began to weaken, the supply side capacity is still being released, and the industry began to enter the new order volume and price decline stage.

2. Expansion demand: The recovery of the downstream shipping market has promoted the increase of new orders this round

From the historical data, the maritime market often leads the recovery of the shipbuilding cycle, and the high freight rate of the maritime market drives the expansion demand of new shipbuilding. In general, the upward movement of shipping prices makes downstream shipowners more willing to place orders, and the demand for new ships increases, thus driving the increase in the number of orders held by shipyards. According to the data of Clarksons, the sea freight index began to rise in 1996, and the number of orders held by shipyards increased. In 2008, the sea freight went down, and the freight rate and the number of orders held by shipbuilders went down simultaneously. After a long ten-year low period in the sea freight market, the sea freight began to enter a recovery cycle in 2017, and the freight rate continued to rise. With the increase in the number of new orders received by shipyards, the number of orders held by global shipyards in 6M20 fell to $1,118.7 billion and began to bottom out.

In 2021, global maritime trade volume will pick up, shipyards will gradually digest orders in hand, and global maritime demand is expected to attract a new round of recovery. The global seaborne trade volume has shown a continuous upward trend for many years. In 2009, affected by the financial crisis, the seaborne trade volume declined briefly. In 2020, affected by the epidemic, the seaborne trade volume also declined, and the global seaborne trade volume began to recover step by step in 2021. The proportion of order capacity in hand is generally affected by three factors: the number of newly signed orders, the number of deliveries and the size of the fleet. According to Clarksons data, the growth rate of shipping fleet capacity has slowed down in recent years, and the proportion of shipyard orders in hand capacity has continued to decline, falling to the lowest 8.4% in 2021, and the proportion of order in hand capacity has recovered in 2022. It reached 10.3%, which means that the orders accumulated by the shipyard have been gradually digested and have basically bottomed out. The fleet capacity caused by the previous round of shipyard capacity expansion is basically cleared, and the future fleet size is expected to begin to grow.

Judging from the global shipbuilding new orders and orders in hand, the recovery of the current cycle of the shipbuilding industry has begun in 2021. According to Clarksons data, in 2021, the economic recovery began to benefit, the demand side of downstream shipowners picked up, and the new orders for global shipbuilding began to show a rebound trend. In 2021, the global new ship orders reached 138.78 million DWT, an increase of 97.2%, and the new orders reached US $128.2 billion, an increase of 130.3%. The number of new orders received in 2022 is 88.1 million deadweight tons, down 36.5% on the same basis, but the amount of new orders received in 2021 under the condition of a high base, still an increase of 8.2%. We believe that the main reason is that the current upward cycle has been in the stage of "volume reduction and increase", the shipyard's capacity is relatively rigid, and the order schedule has reached 2025. But the price of new ships continues to rise. In terms of orders in hand, in 2022, global shipbuilders achieved a bottom recovery in orders in hand, reaching 226.34 million deadweight tons, and the order value reached 271.1 billion US dollars, an increase of 19%. The global new shipbuilding market is showing signs of recovery.