According to the Wall Street News App, Changjiang Securities released a research report stating that shipbuilding capacity has decreased by 40% compared to the highest point in 2011, and short-term significant growth is unlikely. Looking to the future, the prosperity of the shipbuilding industry will continue to rise, still requiring the continuation of new orders. Taking into account only the aging issue, it is expected that there will be an additional 3.5-4.9 million TEU orders before 2030. Meanwhile, considering aging and environmental protection requirements, the number of new orders will increase to 6.2-6.9 million TEU, accounting for 21-23% of existing capacity. Container ship capacity will be saturated before 2030.

Furthermore, the low proportion of orders for oil tankers and dry bulk carriers and the shortage of green fuel-powered ship orders may bring greater opportunities for new shipbuilding orders in the future. 2025 will be a key year for order realization. The IMO carbon emission pricing plan will gradually become clear, and there will be significant progress in the commercialization of ammonia engines and the production of green ammonia, catalyzing demand.

Changjiang Securities' main points are as follows:

The cyclical industry cannot be separated from demand cooperation.

Currently, shipyard orders are scheduled for 2027-2028, and new shipbuilding prices are close to the 2008 peak. In the past decade, the shipbuilding industry's production capacity has been cleared, and the number of active shipyards is only equivalent to one-third of that in 2008, and production capacity (GT) has decreased by 40% compared to the highest point in 2011. Looking to the future, China's shipbuilding industry will still focus on controlling production capacity, and the capacity growth of old shipyards restarted is limited. Labor shortages and rising costs limit the increase of overseas production capacity in countries like Japan and South Korea. Shipbuilding capacity short-term significant growth is unlikely.

Therefore, the further upward trend of the industry's prosperity should still depend on the continuity of demand. This report uses scenario analysis to calculate: 1) the new order demand only considering aging of the fleet; 2) the new order demand considering both aging and environmental protection catalyzing. Container ship aging exacerbates, and there is still a demand for updates.

The aging of small and medium-sized ships exacerbates and there is rigid demand for updating old ships, because 1) the operating cost of aging ships has increased significantly; 2) Currently, most of the orders on hand are for large vessels. Considering the port infrastructure and the transportation mode feeding port to hub port, it is difficult for small and large vessels to replace each other in route deployment. It is expected that there will be an additional 3.5-4.9 million TEU before 2030, accounting for 12-17% of the existing capacity ratio. Currently, container orders have been scheduled until 2027-2028. Under basic circumstances, new orders are expected to continue until 2029.

Green fuel-powered ships account for a small proportion of orders, and there may be more room for future new orders for oil tankers and dry bulk carriers. Increasing the proportion of green fuel-powered ships is one of the core ways to meet emission reduction targets under the condition of considering both aging and environmental protection requirements. The proportion of green fuel-powered ships in container fleets (including orders on hand) is about 10%, but there is still more than twice the gap from the target. Refurbishment is one of the important ways, but it is still in the early stage and is difficult to fill the gap in the short term, which will still catalyze new shipbuilding demand. Before 2030, there will be 6.2-6.9 million TEU of new shipbuilding orders, accounting for 21-23% of existing capacity, and container ship capacity will be saturated before 2030.

The strict carbon neutrality policy is catalyzing environmental protection demand.

When considering both aging and environmental protection requirements, increasing the proportion of green fuel-powered ships is the core way to meet emission reduction targets. The proportion of green fuel-powered ships in container fleets (including orders on hand) is about 10%, but it is still more than twice the gap from the target. Commercialization of ammonia engines and production of green ammonia are expected to make significant progress by 2025, which will still catalyze new shipbuilding demand. Before 2030, there will be 6.2-6.9 million TEU of new shipbuilding orders, accounting for 21-23% of existing capacity, and container ship capacity will be saturated before 2030.

When will the demand be realized: 2025 or the key year of catalyzing demand. IMO is currently in the transition period from early to mid-term on emission reduction strategies and related measures, and the carbon emission pricing plan will tend to become clear in 2025. At the same time, ammonia is one of the ideal energy sources for green fuel-powered ships. The development and commercialization of these engines and the production of green ammonia are expected to make significant progress by 2025. Therefore, 2025 will be a key year for catalyzing new container shipbuilding orders.

Symbols to watch: China Shipbuilding Industry, China Shipbuilding Industry Group Power, and China CSSC, the world's leading shipbuilding companies.

Risk Warning: Downward trend in the shipping industry's prosperity; IMO environmental protection regulations fall short of expectations; price increases for steel and other products; the expansion of green fuel production capacity and the progress of main engine research and development fall short of expectations.