According to the research report released by Changjiang Securities, green fuel ships are the ultimate means to achieve the target of zero greenhouse gas emissions from ships, and the demand for new ships in the future will be sustainable. Shipyards will benefit from further tightening of capacity. It is recommended to pay attention to China CSSC (600150.SH), a global leading shipbuilding company that constantly receives new and existing orders and maintains a leading position in the industry. In addition, the transatlantic freight rate is still on the rise, and the fundamentals of container shipping remain strong. In July, there will still be further upward space in the market supply and demand conflict. It is still recommended to pay attention to Cosco Shipping Holdings (601919.SH), a global top-tier shipping company with ample cash flow and stable dividend policy.

Recent reports from TradeWinds state that Dafei Shipping plans to spend $3.5 billion to order 20 LNG dual-fuel container ships from South Korea's Hyundai Heavy Industries (HD Hyundai), including 12 16k TEU and 8 8k TEU ships. So far, the new container ship orders in June will reach 35 ships (330,000 TEU).

The main opinions of Changjiang Securities are as follows:

New shipbuilding activities are still active, and container orders have increased significantly.

After a brief correction in May, new orders rebounded in June. From June until now, the total number of new orders for the three major ship types (bulk, breakbulk, and container) is 62 ships, of which the new container ship orders amount to 35 ships (330,000 TEU), the highest since July 2023. In addition, the market report stated that Maersk is negotiating with ship leasing companies and shipyards to build a new batch of 16k TEU LNG dual-fuel container ships. There may still be new shipbuilding orders in the future.

South Korean shipyards are the biggest beneficiaries of Dafei Shipping's new orders, and Chinese shipyards such as Hudong Zhonghua, Huangpu Wenchong, and Shanghai Waigaoqiao Shipyard, which have recently undertaken more container ship orders, did not benefit. Judging from the shipyard's order coverage and capacity situation, most Chinese shipyards have an order coverage ratio of more than 3.5 years, which means that the delivery time for new orders may be pushed back to after 2028. However, Hyundai Heavy Industries and Samsung Heavy Industries have relatively lower order coverage ratios (below 3 years), and therefore have an advantage in delivery time for new orders.

Dafei Shipping's 20 new orders are all undertaken by South Korea's Hyundai Heavy Industries, and Chinese shipyards such as Hudong Zhonghua, Huangpu Wenchong, and Shanghai Waigaoqiao shipyards, which have recently undertaken more container ship orders, did not benefit. From the shipyard's order coverage and capacity situation, most Chinese shipyards have an order coverage ratio of more than 3.5 years, which means that the delivery time for new orders may be pushed back to after 2028. However, Hyundai Heavy Industries and Samsung Heavy Industries have relatively lower order coverage ratios (below 3 years), and therefore have an advantage in delivery time for new orders.

Faced with active demand for new shipbuilding, shipyards may choose to actively pick orders in order to obtain high profits.

Changjiang Securities pointed out that by comparing the delivery times of newly signed orders for the three major ship types in May and June, the planned delivery time for new bulk cargo ship orders in May is still concentrated in 2027. However, with the increase in new container ship orders in June, new orders for bulk cargo ships in June have been pushed to 2028, and the delivery dates for some individual orders have been scheduled for 2029. The core reason may be the difference in shipbuilding gross profit rates for different ship types, which has led to shipyards actively squeezing out capacity to select high-profit ship types. According to the data disclosed in the 2023 annual report of CSSC Offshore & Marine Engineering, the gross margin rate for container shipbuilding business in 2023 was 14%, special ships and others were 3%, but bulk cargo ships were only 1%.

Therefore, for shipyards, container ships, oil tankers, and bulk cargo ship orders have different priorities, which reflect different levels of profitability. Shipyards have incentives to pick orders actively, so as to push back or delay the demand for low gross margin ship types.

Against the background of carbon neutrality, there is still an increase in demand for new shipbuilding.

Last year, IMO revised its greenhouse gas reduction strategy at MEPC80 (the 80th session of the International Maritime Organization's Marine Environment Protection Committee), which provided a clearer direction for reducing carbon emissions in shipping, namely to achieve net zero emissions around 2050. Although the IMO's emissions reduction strategy is not yet mandatory, and the reward and punishment mechanism is still under discussion, in the context of carbon neutrality, the shipping industry will face a massive replacement of ships. For example, in the container shipping industry, publicly available information shows that more than half of the top 10 container shipping companies plan to invest heavily in new dual-fuel power ships in the next 5-10 years to achieve the target of net zero emissions by 2050. At the same time, ONE and HMM also plan to further expand their fleet and capacity.

Risk warning: the environmental restrictions of IMO are lower than expected; global macroeconomic fluctuations.