Incident: According to the company's response on the Wind Investor Q&A platform on December 21, 2023, China Shipbuilding Huangpu Wenchong Shipping Co., Ltd., a holding subsidiary of the company, is currently participating in the bidding project of the Danish shipping company Maersk for several methanol dual-fuel power regional container ships.
Huangpu Wenchong is a major shipbuilding enterprise under China Shipbuilding Group Co., Ltd. Huangpu Wenchong has five core factory areas, covering an area of nearly 3.2 million square meters, a total of more than 5,300 meters of terminals, and a number of large shipyards of 12,000 tons, 25,000 tons, 70,000 tons, 150,000 tons, 200,000 tons, etc., providing strong support for the booming development of China's shipbuilding industry. Huangpu Wenchong is a leading international regional container ship manufacturer. The series of regional container ships represented by 1,700 boxes, 2200 boxes, and 2,700 boxes is famous in the global market.
The shipping industry's pursuit of environmental protection promotes ship upgrading, and methanol fuel has become a popular choice. According to responses from the company's investor Q&A platform, the participating projects are mainly methanol dual-fueled regional container ships. As the shipping industry gradually integrates into the EU emissions trading system from 2024, shipowners need to submit corresponding quotas for greenhouse gas emissions such as carbon dioxide. The cost of using traditional fossil fuels continues to increase, which helps shipowners transition to new energy sources. The transition to clean energy is an inevitable trend in the development of the shipping industry, and demand for clean fuel-powered ships is expected to grow steadily.
Shipyard orders in hand tend to be saturated, and ship delivery cycles are getting longer. Judging from the global and Chinese shipyard production guarantee factors (in-process orders/average three-year delivery), the current production guarantee factor for global shipyards is 2.89 years, up 0.34 years from '22, while the production guarantee factor for Chinese shipyards is 3.46 years, up 0.73 years from '22, which means that Chinese shipyards now have a higher capacity utilization rate.
Under limited production capacity, ship prices have changed to demand pricing rather than supply pricing. The raw material in shipbuilding is steel plate as the main raw material. Looking back at the price of new shipbuilding in China, ship prices are largely affected by the price of marine steel plates. However, with the decline in steel prices, the price of new ships is still high. We believe this is due to the tightening of production capacity of global shipyards, so the current ship prices are mainly dominated by demand rather than supply of raw steel plates. As of October 2023, the Clarkson New Ship Price Index closed at 176 points, up 14 points year on year.
Profit prediction and rating: Under the environmental policy, fuel replacement is imperative, so rigid ship replacement demand will further support shipbuilding demand. Under the limited production capacity of global shipyards, ship prices have changed to demand pricing rather than supply pricing. Optimistic about the profit elasticity of Chinese shipbuilders in the new round of shipbuilding cycles, the company continues to build core competitiveness and develop new growth points. Profitability is expected to further improve, covering for the first time, giving a “buy” rating.
Risk warning: risk of exchange rate fluctuations, risk of shipbuilding demand falling short of expectations, risk of fluctuations in raw material prices and labor costs.