(report producer: CICC Securities )
1. Overall introduction to the shipbuilding industry
container ship , bulk carrier , and oil tankers are three main ship types. Liquefied gas ships have attracted much attention recently
unit of measurement: DWT is a commonly used unit of measurement in the industry, indicating the load capacity of the ship during operation
decimal tons (Dead Weight Tonage, referred to as DWT): The load capacity that a ship can use in operation can be divided into total decimal tons and net decimal tons. Total loading of dittons refers to the maximum weight that a ship can carry according to the load line marking. It includes the sum of the cargo carried by the ship, the fuel required on the ship, fresh water and other reserve materials; net loading of dittons refers to the maximum weight of the cargo that the ship can carry, also known as cargo loading of dittons. The diptop tons used in the industry usually refer to the total diptop tons.
Compensated Gross Tonage (CGT) is a unit of measurement calculated based on gross tonage . It not only reflects the amount of shipbuilding workload more than the load tons, but also reflects the price and output value to a certain extent. Taking into account the availability of data and maintaining the same caliber with industry associations and companies' annual reports, this article still uses diptop tons.
container ship is a cargo ship that carries standard cargo containers (i.e. containers) with uniform specifications. The shape and structure of the container ship are significantly different from that of the grocery ship. It has a narrow and long appearance, a single deck, a straight upper deck, and a large cargo holder, and its width can reach 70%-80% of the ship's width. A fixed grille guide frame is installed inside the cargo hold to facilitate the loading and unloading of the container and prevent the box from moving when the ship sways. Container ships can be divided into partial container ships, full container ships and convertible container ships according to their structure.
bulk carrier refers to a general term for ships that transport large bulk dry bulk cargoes such as grains, coal, mineral sand, salt, cement, etc., also known as dry bulk carrier or bulk cargo ship. Bulk cargo ships are generally single-layer decks, tail-type, with obese hulls and low speeds. Because there are often special docks to load and unload, there are generally no loading and unloading equipment on the ship. Bulk cargo ships can be divided into the following levels according to their load capacity: flexible bulk carriers, large flexible bulk carriers, Panama type bulk carriers, Cape of Good Hope type bulk carriers and super large bulk carriers.
Oil tanker refers to a ship that transports various oils in bulk, usually bulk oil and refined oil. With the rapid growth of oil production and transportation, tankers are developing towards large-scale development. Oil tankers can be divided into the following categories according to DTN : general type, flexible type, Panama type , Alfra type, Suez type, giant (VLCC) and super giant tanker (ULCC).
LNG ship (hereinafter referred to as LNG ship ) is a ship used to transport LNG ship . LNG ships are known as the "jewel in the crown" of the world's shipbuilding, and are extremely difficult to build. According to the different storage tank systems, it can be divided into film type and self-supported type (mainly spherical tank type). The film LNG ship has a high volume utilization rate and a light structural weight. Therefore, the current construction of new LNG ships, especially large ships, mostly adopts thin film technology routes. The technology patent for film type cargo tanks is mainly provided by French GTT, and the technology patent for spherical tank type cargo tanks is mainly provided by Kvaerner, Norwegian . Currently, both Chinese and Korean shipyards use French GTT company patents.
2. A new round of upward cycle has begun: freight rate increase is the initial driving force, and aging of ships + environmental protection policies are the fundamental driving force
The shipbuilding industry has shown a cyclicality of about 20 years. The new round of upward cycle has reached
Under the influence of external macroeconomics, policies and internal reinvestment and replacement demand, global shipbuilding has shown a cyclicality of about 20 years. Looking at the century-old development history of global ships, ship cycles are closely related to the macro economy, but policies, wars and other factors will also lengthen or shorten the cycle length, but overall it will roughly show a cycle of about 20 years. The specific development laws are as follows: economic prosperity drives the increase in maritime trade volume, stimulating demand for ship transportation, and the volume of new ship orders continues to increase; as economic development stabilizes and uncontrollable factors lead to a landslide, excess capacity brings burden to the industry, and the industry enters a period of capacity reduction adjustment until the supply side is fully cleared and a new economic growth point appears, entering the next upward cycle again.
This cycle sequence: container ships are ahead, LNG ships follow closely, tankers and bulk carriers are expected to relay
New orders in November 2020 started a new round of expansion, and in 2022, due to the high base and the full production schedule of shipyards, it has declined. Starting from November 2020, new orders from global ships have begun a new round of expansion cycle, with container ships and bulk carriers being the main force. As the impact of the epidemic subsides, global trade recovers, and actual capacity has a gap, driving the shipping prices headed by container ships soared, shipping companies' profits improved rapidly, and their willingness to expand was strong, which led to the rapid increase in new ship orders. In 2021, the global ship new orders reached 133 million dwt, an increase of about 93% year-on-year; among which container ships received 47 million dwt, an increase of about 332% year-on-year, accounting for 35%; bulk carriers received 49 million dwt, an increase of about 100% year-on-year, accounting for 37%.
Container Ship: New ship orders increased by more than 300% year-on-year in 2021, and freight rates fell but are still at a high level. The sharp rise in container freight rates has led to a surge in new orders, and freight rates have fallen recently, but are still at high levels. Since 2021, container freight rates have risen sharply, and the CCFI comprehensive index surged from the lowest point below 1,000 to 3,600 points, driving the soaring orders for new container ships. In 2021, global container ships received 46.88 million dwt of new orders, a year-on-year increase of 332%. The CCFI index in 2022 fell to 3188 points in July, down about 11% since the beginning of the year, but it was still more than three times the average before 2019, maintaining a high level. The growth rate of new orders for container ships in 2022 declined. From January to July, a total of 19.63 million dwt of new orders were received, a year-on-year decrease of about 47%.
LNG ship: New ship orders increased by 176% year-on-year from January to July 2022, and the conflict between Russia and Ukraine may bring huge new demand. The Russian-Ukrainian conflict may lead to a sharp increase in European LNG shipping demand, which will bring huge demand for new LNG ships. After the Russian-Ukrainian conflict, Europe may use sea transportation to replace Russian pipeline gas. According to Clarksons' assessment, if most of the pipeline natural gas trade in Russia-Europe is gradually cancelled, the global LNG trade volume will reach 620 million tons in 2030; if LNG replaces all pipeline natural gas exported by Russia to Europe, and the growth of Asian LNG trade will not be affected, the global LNG trade volume may increase from 401 million tons in 2021 to 695 million tons, bringing about the capacity demand of about 110 LNG ships.
tanker: The added value is relatively low, new orders continue to shrink, and subsequent demand is expected to be restored driven by freight rates. The number of new orders for tankers worldwide continues to shrink. In 2021, the freight rates of crude oil and refined oil were at a low level, and the number of new tankers orders also decreased year-on-year. In 2021, the global tanker (greater than 10,000 deadweight tons) received 22.03 million deadweight tons, a year-on-year decrease of about 12%. The freight rates of crude oil and refined oil increased sharply in 2022, but the number of new orders received by tankers continued to shrink. The cumulative new orders received from January to July was 3.28 million deadweight tons, a year-on-year decrease of about 83%. This is mainly due to the fact that after the soaring new ship orders in 2021, the supply of shipyards was relatively tight, while the added value of tankers compared with container ships and LNG ships was lower, and the shipyards were not willing to take orders.
Bulk Cargo Ship: New ship orders increased by 100% year-on-year in 2021, and the BDI index has weakened recently. The number of new orders received by bulk carriers is highly correlated with the BDI index, with a significant increase in 2021 and a decline in 2022. According to the Baltic dry bulk shipping index (BDI), global bulk freight rates plummeted after the financial crisis in 2008, and the BDI index was basically below 2,500. In 2021, the world recovered from the epidemic, and the BDI index climbed to nearly 5,000 points, which also drove the rapid increase in new orders from global bulk carriers. In 2021, global bulk carriers added 48.61 million deadweight tons, an increase of about 100% year-on-year. In 2022, as the BDI index fell, new orders also fell year-on-year. The cumulative new orders received from January to July was 10.71 million deadweight tons, a year-on-year decrease of about 66%.
3. Shipyard profit analysis: In the short term, steel prices and exchange rate improve, medium and long term, high-priced orders are waiting for delivery, and the statement continues to improve
In the short term, the decline in steel prices and the strengthening of the US dollar exchange rate will bring about improvement in performance
Steel prices will bring about improvement in profitability of shipyards. Steel accounts for a high proportion of new ship costs, and price fluctuations have a great impact on shipyard profitability.The cost of new ships is roughly divided into three parts: raw materials, equipment and labor costs. Raw materials account for about 26%-33%, equipment accounts for about 45%-52%, labor costs account for about 24%-26%, steel accounts for as high as 65%-70% of raw materials, and direct steel costs account for about 17%-23% of the total cost. In addition, many parts also involve steel.
USD versus RMB exchange rate appreciation has strengthened the performance of the shipyard. The dollar-yuan exchange rate affects shipyard profits. Shipyard revenue is settled in US dollars, so US dollar exchange rate fluctuations affect the company's performance. However, in order to avoid the exchange rate risk of exported ships, enterprises have signed several forward foreign exchange contracts with financial institutions. Taking Chinese ships as an example, the company has locked in an exchange rate of about 80%, but the US dollar against the RMB has appreciated recently, with an average exchange rate of about 6.7 in July, an increase of about 5% compared with the low point in the first half of the year, which will increase the performance of shipyards to a certain extent.
In the medium and long term, high-priced orders since 2021 provide certainty for performance upward
2021 high-priced orders will be delivered in a centralized manner from 2023 to 2024, and the performance of shipyards will be significantly improved. In 2021, the global ship new orders received significantly, and the new ship price index also entered an upward channel, showing a trend of "both volume and price increase". In 2021, the global new order amount received was US$115 billion, an increase of 126% year-on-year. The total amount of new orders received by China Shipyards in 2021 also doubled the year-on-year. The ship's four major shipyards under 2021 usually have a 2-3 year-on-year growth. It is expected that the high-priced orders in 2021 will be concentrated in 2023 and 2024. By then, the shipyard's revenue and net profit will usher in a significant increase.
4. Key companies analysis
China Shipbuilding: the leader in domestic ship assembly, holding the four core shipyards
Company has experienced two asset injections, gathering four top ship assembly assets of Jiangnan Shipbuilding, Waigaoqiao Shipbuilding, China Shipbuilding Chengxi , and Guangchuan International . In 1998, the company's predecessor, "Hudong Heavy Machinery", was listed, mainly engaged in marine diesel engine ; in 2007, it acquired the assets of Waigaoqiao Shipbuilding and China Shipbuilding Chengxi, a subsidiary of China Shipbuilding Group, and renamed it "China Shipbuilding"; in 2020, the company completed a major asset restructuring, and the core assets such as Jiangnan Shipbuilding and Guangzhou Shipbuilding International were injected, and it also participated in Huangpu Wenchong, which has gathered top domestic ship assembly assets. As of 2022H1, the company holds 100% of the shares of Jiangnan Shipbuilding , Waigaoqiao Shipbuilding, and China Shipbuilding Chengxi, 55.64% of the shares of Guangzhou Shipbuilding International, and 30.98% of the shares of Huangpu Wenchong.
China Shipbuilding Defense : China Shipbuilding Group backbone shipbuilding enterprise
Company is a backbone shipbuilding enterprise under China Shipbuilding Group and a national core military production enterprise. The holding subsidiary Huangpu Wenchong has a 170-year history of factory construction and more than 130 years of military industry. It is the main construction base for military ships, special engineering ships and marine engineering projects in China. It is the largest and strongest production base for dredging engineering ships and branch container ships in China.
China Heavy Industry : The former core asset platform of Beishu Group, and holds three core shipyards
Company is a leading domestic military and civilian shipbuilding company. It owns Da Ship Heavy Industry , Wuhan Ship Heavy Industry, Qingdao Beishu and other internationally renowned modern shipbuilding companies. The company was established in 2008 and is a core ship asset platform under the former Beichuan Group. In terms of military products, it undertakes the development and production of marine defense equipment such as my country's aircraft aircraft carrier , various types of destroyers , frigate , and conventional power submarine ; in terms of civil products, it has formed VLCC, LR2 finished oil tanker, 10,000-box-class container ship, Cape of Good Hope bulk carrier, 250,000-ton ore sand ship, and 400,000-ton ore sand ship, among which the company's VLCC and VLOC have a leading global market share, and the global proportion of VLCC orders in 2021 accounted for more than 20%.
Asian Star Anchor Chain: the global anchor chain and mooring chain leader, benefiting from the large cycle of shipbuilding recovery
Company is the global leader in the global marine chain and marine mooring chain, fully benefiting from the recovery of the shipbuilding industry. At the industry level, the shipbuilding industry is in a new round of upward cycle. In addition, the rise in crude oil prices has brought about an increase in demand for offshore drilling platforms, and the orders for offshore wind power are gradually increasing.At the company level, the company's marine anchor chain and mooring chain are absolutely leading the world, with market shares of about 55% and 45% respectively in 2021, and demand will increase significantly in the future.
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