Author: Gelonghui·Tangyu Abao
In late trading on December 6, the port shipping sector experienced unusual movements and rose. Among them, China Merchants Shipping closed the daily limit, COSCO Shipping Energy rose more than 8%, and China Merchants Nanyou , COSCO Shipping Holdings, Ningbo Shipping and other stocks also saw significant gains.
(Picture source: Flush)
news, from December 3rd to 6th, the 20th China International Maritime Exhibition was held in Shanghai. The
exhibition attracted 2,200 exhibiting companies from more than 30 countries and regions. Among them, Intelligent intelligent shipping has become the focus of major exhibitors at this exhibition. In addition, a large number of low-emission or even zero-emission technologies and products have emerged, highlighting the importance of environmental protection in the future shipbuilding industry.
From the perspective of the focus of financial attacks, China Merchants Shipping and COSCO Shipping Energy are stocks in the shipping sector whose main business is oil transportation. So, what is the underlying logic of oil transportation in the shipping sector?
Speaking of oil transportation, it actually means transporting crude oil or refined oil products, accounting for about 35% of the entire maritime trade volume. When observing the prosperity of oil transportation, we generally observe it through VLCC (very large crude carrier) freight rates. Judging from the current VLCC freight rates, the annual average daily rental price is approximately US$22,000/day, which is at the bottom of history. From a cyclical perspective, it has experienced a four-year downward cycle. The continued recession in the
industry has led to low willingness of upstream shipyards to build ships, and production capacity has continued to shrink significantly. According to the latest data, in the first ten months of 2019, VLCC new ship orders were only 12, a year-on-year decrease of more than 70%. The VLCC delivery cycle takes 2-3 years, so even if the growth rate of new ship orders stabilizes and rebounds, it will take 2-3 years to be reflected in the supply. In this way, the continued contraction of the supply side of the oil shipping industry will support the increase in tanker freight rates in the future.
According to public data, in the third quarter of 2019, global oil demand reached 100.7 million barrels/day, an increase of approximately 1.77 million barrels/day from the second quarter. Global oil demand continues to pick up. In terms of shipping capacity supply, from January to September 2019, the average daily revenue of the VLCC ship type Middle East-China (TD3C) route was US$22,335/day, a year-on-year increase of approximately 114%, and the daily revenue of other ship types on major routes increased by 64%-225% year-on-year.
In addition, according to international environmental protection regulations, oil tankers must reduce sulfur emissions and begin implementation in 2020. There are two ways to reduce sulfur emissions: using low-sulfur oil and installing a desulfurization tower on the ship. The cost of the former is too high, so the general option is to install a desulfurization tower, which requires the tanker to be repaired for a period of time (2-3 months). This will lead to a large temporary withdrawal of tanker supply and will also cause an increase in oil shipping prices.
Also, according to the latest import and export data released by the United States, the United States has become a net exporter of crude oil for the first time in 70 years, and its export volume has exceeded Saudi Arabia. Once the export of crude oil from the United States becomes a trend, it means that the average shipping distance of global crude oil will increase significantly, stimulating the demand for large tankers.
From the perspective of the A-share market, China Merchants Shipping and COSCO Shipping Energy are undoubtedly the leading stocks in the oil transportation concept.
Among them, China Merchants Shipping (601872.SH): The company focuses on international crude oil, international and domestic dry bulk cargo, domestic ro-ro, international and domestic breakbulk and other shipping businesses. In the first half of 2019, the company received 2 VLCCs New ships such as oil tankers, 2 VLOCs and 2 ro-ro ships were not withdrawn or sold. As of June 30, 2019, the company owned 51 100% owned VLCC tankers and owned and controlled 31 VLOCs with a capacity of 400,000 deadweight tons. The company continues to maintain its leading position in the world in these two segments, with its own transportation capacity ranking first in the world.
Judging from the company's performance, it shows a rapid growth trend. From January to October 2019, the company achieved a total operating income of 9.807 billion yuan, a year-on-year increase of 33.99%; net profit was 723 million yuan, a year-on-year increase of 64.25%. Among them, the company's oil tanker transportation achieved operating income of 3.007 billion yuan, accounting for 47.16% of operating income.
COSCO Shipping Energy (600026.SH): The company's main business is engaged in international and Chinese coastal crude oil and refined oil transportation, international liquefied natural gas (LNG) transportation and international chemical transportation.As of June 30, 2019, the company owned and controlled a total of 151 tanker shipping capacity, with a deadweight of 21.88 million, of which 137 were owned, with a deadweight of 1,902, and 14 were leased, with a deadweight of 2.87 million. There are also orders for 16 ships with a capacity of 3.06 million deadweight tons. The company is a leading enterprise in China's coastal crude oil and refined oil transportation field. In the field of coastal crude oil transportation, the company has always maintained its leading position in the industry and holds more than 55% of the market share.
Judging from the company's latest performance, from January to September 2019, the company achieved a total operating income of 10.53 billion yuan, a year-on-year increase of 26.81%; net profit was 583 million yuan, a year-on-year increase of 315.18%. Among them, oil transportation accounts for more than 70% of the company's total revenue.
(Picture source: COSCO SHIPPING Energy 2019 third quarterly report)
