The Zhitong Finance App learned that recently, the price increase sentiment of shipping companies was supported by many factors: the protracted conflict in the Red Sea led to tight supply chains. On the one hand, ship detours led to an increase in distance, effectively increasing the demand for capacity in the sea and absorbing existing capacity; on the other hand, the decline in ship turnover efficiency has led to tight port container turnover, further exacerbating supply chain tension. The demand side is marginally improving. On the one hand, macroeconomic data in Europe and the US improved marginally. On the other hand, due to longer transit times due to detours, compounded expectations of rising freight rates during the peak season, shippers prepared goods ahead of schedule. Furthermore, the US line has entered a critical period of signing the Changxie contract, and shipping companies are motivated to increase prices.

Related targets: As supply and demand relationships improve, the shipping sector is profitable or gradually recovering. It is recommended to focus on COSCO Marine Control (601919.SH,01919), Haifeng International (01308), Oriental Overseas International (00316), Zhonggu Logistics (603565.SH), etc.

The main views of Zheshang Securities are as follows:

Container ships have entered the centralized delivery period, but the increase in delivery of 17000+ TEU, the main ship type in the Far East - Europe is limited

Container ship stock market supply situation: Since 2022, container ship orders have grown rapidly. As of April 2024, the global stock of container ships is about 6,239, with a total capacity of about 285.49 million TEU, and about 749 ships in hand, with a total capacity of about 6.347 million TEU, accounting for about 22% of order capacity.

Expected delivery of order capacity: Since 2023, container ships have been delivered one after another. According to Clarksons data, delivery capacity is expected to account for 8.3%, 6.8%, 3.9%, and 2.6% of the current capacity from 2024 to 2027, respectively. 2024-2025 is the centralized delivery period for order capacity. By ship type, the 17000+ TEU ship on the main route will account for about 6.0% of the delivery capacity in 2024, and delivery capacity is relatively limited.

The high concentration pattern and industry alliances form the impetus for price promotion. Foreign trade container liner companies have a high level of concentration. As of May 10, 2024, the top ten container liner companies accounted for 84.2% of capacity. Coupled with the formation of industry alliances and cooperation between companies, on the one hand, it helps reduce vicious price competition through suspension of flights to control capacity in the context of deteriorating supply and demand environments. On the other hand, in the context of improving supply and demand relationships, it is expected that higher freight rates can be achieved through joint pricing.

Ships took detours after the Red Sea conflict, and the range increased by about 29%. The Far East-Europe Rao trip alone will drive global demand for box-sea miles to increase by 5.27%

Container ships detour a large number of times, and there is a marked trend of long-term detours. Since January, container ships have begun to bypass the Cape of Good Hope on a large scale. As of May 8, an average of about 6 container ships arrived in the Gulf of Aden on the 7th, -67%, and the number of containers was 16,700 TEU, -92% year over year; about 20 container ships arrived at Cape of Good Hope, +262% compared to the same period, and the number of containers was 224,300 TEU, +446% year over year.

According to Clarksons data, if you avoid the Red Sea and choose a detour, the route distance and number of sailing days will be greatly increased. Take the Far East to Europe as an example. The number of days to sail around the Cape of Good Hope is about 36 days, which is an increase of about 8 days compared to the route through the Suez Canal, and the flight distance will increase by about 29%. According to our estimates, detours on routes from the Far East to Europe will drive a 5.27% increase in global demand for box-nautical mile transportation.

Freight prices have risen counterintuitively: the protracted Red Sea conflict, marginal improvement in demand between Europe and the US, and the entry of the US line into the signing period of the Long Term Cooperation agreement. Three factors work together

The Red Sea conflict has effectively increased the demand for container ship capacity in nautical miles. According to Clarksons data, capacity is expected to increase by about 9.0% in 2024, demand tonnes and nautical miles will increase by about 9.2%, and the relationship between supply and demand in the industry will improve. Among them, the 17000+ TEU ship on the main route accounted for about 6.0% of the delivery capacity in 2024, and delivery capacity was relatively limited. According to Clarksons data, the trade box nautical mile growth rate between Europe and the Far East is expected to be 16% in 2024, and the supply of European capacity is relatively scarce.

The Red Sea detour has led to an increase in demand for shipping containers. On the other hand, in the context of high concentration, the industry is more willing to raise prices. Second, the main ship type on the European route is 17,000 TEU+, which accounts for about 6.0% of the capacity delivered in 2024, and the supply of additional capacity is limited. Shipping prices rose sharply in 2024. Year-to-date, the CCFI index averaged +20% year-on-year, and the SCFI index averaged +100% year-on-year.

Since May, a number of shipping companies have disclosed price increases. At the beginning of the month, Dafei and Hapag-Lloyd targeted freight transfers on routes such as Asia - Northern Europe, Asia - Mediterranean and North Africa. Taking DaFei as an example, the new FAK standards for the Asian-Nordic route are 2,700 US dollars/TEU and 5,000 US dollars/FEU. The new standard increases were 500 US dollars/TEU and 1,000 US dollars/FEU; recently, a number of liner companies have successively adjusted peak season surcharges for Asian-African routes.