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

Ship new orders indicators are generally 3-5 years ahead of ship deliveries, and delivery times have accelerated in recent years. According to the data of Clarksons, according to the statistics of 10,000 deadweight tons, the global new orders received in 3M06 reached the peak, followed by another peak in 12M06, corresponding to the global ship delivery reached the peak in 1M11, and the index of new orders received by ships was about 5 years ahead of the ship delivery volume. The new orders for ships reached the peak again at the end of 2013, and the corresponding ship deliveries reached the peak at 1M17, corresponding to about 38 months. The first peak of the new rising cycle of ship orders in this round appeared in 3M21, and the ship delivery is expected to peak in 2024-2025, according to the historical leading rhythm.

By observing the obvious growth of downstream shipowners' performance, sufficient monetary funds are expected to promote the increase in demand for new orders. In 2021, with the recovery of the shipping market and the continuous improvement of shipping prices, the performance of downstream shipowners has achieved substantial growth. According to the company announcement, 1-3Q22 COSCO Sea Control/COsco Sea Energy/China Merchants Shipping operating income increased by 37%/33%/65%, respectively, and net profit increased by 44%/44%/139%. Taking COSCO Offshore Control as an example, as of 1-3Q22, the currency amount of COSCO Offshore Control reached 297.3 billion yuan, an increase of 106%, and sufficient cash promoted the willingness of shipowners to place orders.

From the perspective of specific maritime market demand, the prosperity of consolidated and bulk freight transportation will take the lead in recovering in 2021, and the bottom recovery of oil tanker and LPG ship shipping will begin in 2022 to achieve relay. In general, the freight rate index reflects the overall prosperity of shipping. In 2021, benefiting from the economic recovery, the global maritime trade volume rebounded, the shipping index rose, and the bulk carrier and container shipping rates led the rise. In 2022, with the port congestion link and the release of capacity, the container freight rate has been adjusted back, but it still remains at a high historical fraction. In 2022, affected by the Russia-Ukraine conflict and high oil prices, the demand for oil and gas vessels has increased significantly, and freight rates have risen successively. Driven by high transport prices, new orders for gas vessels such as oil tankers and LPG vessels are expected to be further expanded.

On the whole, the three major shipping vessel types, container ships, bulk carriers and oil tankers, have different recovery rhythms in this upward cycle. We believe that in the short and medium term, it is driven by container ships and bulk carriers, and oil tankers are expected to further contribute to shipbuilding orders in the long term. In the short term, the recovery of trade after the epidemic will push up the freight rates of containers and dry bulk cargo. Since the outbreak of the financial crisis in 2008, the shipping industry has entered a 10-year adjustment period, with the Baltic Dry bulk Index (BDI) and Container Freight Index (SCFI) continuing to be depressed. In 2021, with the economic recovery, the demand for bulk commodities increases, and the prosperity of the dry bulk maritime market increases. In 2021, the Baltic Dry Index (BDI) exceeded 5000, the highest level in nearly 10 years. In 2022, port congestion has been alleviated to a certain extent, and under the superposition of factors such as the rapid increase in fleet capacity, the freight rate of 2H22 consolidated and dry bulk freight has been adjusted back. According to the IMF's latest forecast, China's economic growth rate will increase from 3% in 2022 to 5.2% in 2023, which will promote the increase in global demand for bulk commodities, consumer goods and other maritime transportation, which is conducive to the stability and activity of dry bulk freight and consolidation.

Container and bulk carriers benefited from the recovery of trade after the epidemic, and new orders increased significantly in 2021. Among them, the container ship shipping market in 2021 boom, new orders of 45.03 billion US dollars, an increase of 444%, while the economic recovery to promote the increase in demand for large goods, 2021 new bulk carrier orders of 20.97 billion US dollars, an increase of 139%. With the gradual easing of container supply and demand in 2022, new orders for container ships fell somewhat in the case of a high base in 2021, but still remained at a high historical level, reaching $34.647 billion. Bulk carrier orders declined significantly in 2022, mainly due to high commodity prices in 2022, high inflation has a certain impact on the dry bulk maritime market, and the dry bulk market is still full of uncertainty in the long run.

In the medium and long term, the demand for crude oil continues to grow, and the prosperity of the tanker market is expected to relay. In 2020, due to the impact of the global epidemic, the macro economic downturn and the replacement of new energy and other factors, the global crude oil trade has declined significantly. With the gradual recovery of the global economy and the increase in trade volume, the demand for transportation and industrial oil has begun to recover. At present, crude oil is in the destocking stage, and the crude oil inventory of the world's major economies is at a low level. Oecd countries' commercial crude oil inventories fell to 3.968 billion barrels, has basically bottomed out, replenishment cycle is expected to resume, according to the improvement of crude oil demand under the corresponding fleet capacity increase, the current oil transport prices have shown signs of recovery, oil tankers are expected to become another support market development after container ships.