As a typical cyclical industry, shipbuilding is ushering in a new upward cycle.
The China Shipbuilding Industry Prosperity Index (CPI) released by China Shipbuilding Association (CSA) for the second quarter of 2024 has risen to 144 points, entering the high prosperity zone.
The shipping market has risen at a high level under the influence of the Red Sea crisis and other factors, and factors such as the cyclical turnover of capacity and green changes in the maritime industry have continued to drive strong demand in the shipbuilding market, with the shipbuilding industry maintaining a high degree of prosperity and the price of new vessels rising at a high level.
The General Administration of Customs released data showing that from January to July 2024, China's cumulative ship exports of 3,470 ships, an increase of 28.30% year-on-year; the amount of 173.679 billion yuan, an increase of 84.40% year-on-year, to become a global ship centre.
In the first half of this year, the shipbuilding industry is red-hot to what extent?
The industry is on fire
As with the super shipbuilding cycle at the beginning of this century, this round of red-hot shipbuilding industry continues to be pulled by the hot shipping market.
In the first half of 2024, by geopolitical conflicts triggered by ship detours and other impacts, the global shipping market rate pivot overall rise. The Clarkson Shipping Index closed at USD 28,324/day at the end of June, up 15.90% from the beginning of the year; the average value for the first half of the year was USD 25,498/day, up 5.70% year-on-year.
In recent years, the world's shipbuilding industry, the main market share by China and South Korea to compete, the first half of this year, China once again confirmed the leading edge.
Clarkson research statistics, in the first half of 2024, China's shipyards new ship orders in the world for the first time accounted for more than 60%, ranked first in the world for the sixth consecutive year; new ship orders for a total of 231 ships of 2004 million dwt, the global share of more than 70%; the Chinese side continues to dominate the order of bulk carriers, a total of 174 received 15.39 million dwt, a global share of more than 90%.
Data from the Ministry of Industry and Information Technology (MIIT) shows that in the first half of 2024, China's shipbuilding completion volume, new orders, and hand-held orders, in terms of deadweight tonnes, increased by 18.40%, 43.90%, and 38.60% respectively year-on-year, accounting for 55%, 74.70%, and 58.90% of the world's market share.
The trend of green ship is blowing from the shipping market to the shipbuilding market. 2024 January EU will shipping industry into the carbon emissions trading system, further promote the green transformation of the European shipowners; International Maritime Organisation IMO in recent years the introduction of greenhouse gas emission reduction strategy for ships, will be a number of carbon nodes ahead of the pace of decarbonisation is significantly accelerated.
This has also led to more shipowners to consider green energy ships when replacing old and new ship types. Since last year, orders for alternative fuels have gradually increased, with orders for ammonia/hydrogen/nuclear fuels, and more and more new orders for higher value-added ships appearing in the shipbuilding industry.
Clarkson research pointed out that in the first half of 2024, the global new shipbuilding market is very active, the scarcity of shipyard space and shipbuilding capacity expansion has become a hot topic in the current new shipbuilding market. From the statistics of the number of new orders signed, the rhythm of receiving orders so far this year is consistent with that of last year. However, in terms of physical sense, shipyards signed orders to accelerate the pace of intent to increase orders; more small and medium-sized shipyards began to receive orders, the customer group from the head of the shipowners to more small and medium-sized shipowners sinking.
Deducted net profit after three consecutive years of losses ushered in the ‘light of day’.
In this context, the first half of the major shipbuilding enterprises have also delivered a more eye-catching report card in recent years.
Capital market Chinese shipbuilding enterprises, according to the first half of this year's revenue scale, China Shipbuilding (600150.SH), China National Heavy Industry (601989.SH), Yangzijiang (BS6.SG), China Shipbuilding Defence (600685.SH), Yaguang Science and Technology (300123.SZ), in turn, for 36.017 billion yuan, 22.102 billion yuan, 13 billion yuan, 8.729 billion yuan, 557 million yuan.
From the net profit attributable to shareholders of the parent company indicators, private shipyards Yangzijiang Shipyard continues to reign ‘the most profitable shipyard’ title, with 3.1 billion yuan leading, followed by China Shipbuilding's 1.412 billion yuan, China National Heavy Industry's 532 million yuan, CSIC Defence's 147 million yuan, Yaguang Technology's -0.029 billion yuan.
Among them, China Shipbuilding Group's China Shipbuilding, China Heavy Industry, China Shipbuilding Defence in the first half of the net profit of the mother of the net profit has doubled, an increase of 155.31%, 177.13%, 1059.43%, respectively, a total of about 2.1 billion yuan of net profit of the mother of the net profit.
Times financial found that in more reflective of the shipyard's main business profitability level of deductible net profit, in addition to the Singapore-listed Yangzijiang did not disclose, four A-share listed shipyards over the past three years have been in the red, China Heavy Industry over the past three years combined loss of more than 5 billion yuan, China Shipbuilding loss of nearly 4 billion yuan, Yaguang Technology about a loss of 2.7 billion yuan, China Shipbuilding Defence loss of nearly 133 million yuan.
Into the first half of 2024, only Yaguang Technology still maintains a loss. The company's information shows that its intelligent boating products include official boats, defence equipment, yacht cruise and so on.
On September 9, the times of finance and economics in the capacity of an individual investor to call Yaguang technology, the relevant staff replied that the company's current boat business domestic customers, the boat industry itself has a low gross profit margin, basically can only be maintained at more than 10%, if counted on the depreciation and amortisation costs of the business is more prone to losses.
The past three years in a row of losses is common to the industry. China's heavy industry securities department related staff said to the times financial, (shipbuilding) industry in the past many years are in a sustained adjustment stage, since 2021 ship prices gradually upward, a number of shipyards only slowly take off.
On 10 September, Wang Xiang, general manager of Veson Nautical Greater China, analysed to Times Finance that although ship prices have risen since 2021, growth at that time was recovering from a lower base point; on the cost side, although steel and main engine prices were at a lower level in 2021 and 2022, but at that time, due to supply chain tensions under the impact of the epidemic and other external factors, cost pressure has increased, ‘which has formed a “scissors” effect, that is, although ship prices have risen, costs have risen faster, resulting in the profitability of shipyards in the ships delivered in the past two years is not ideal.’
Wang Xiang pointed out that, as time goes by, the ship price since the first half of 2021 continued to go up, the dollar exchange rate rebound, steel prices have fallen, this trend makes the previous low ship prices, high costs brought about by the ‘scissors’ effect gradually shifted to a favourable direction, ‘looking forward to the medium and long term, steel prices Looking to the medium and long term, steel prices are expected to remain low, while ship prices may continue to rise. Although the host and other core components of the tight supply will still bring some pressure on the cost, but overall, most of the cost of the growth rate is still lower than the rate of increase in ship prices for shipbuilding enterprises to create favourable conditions for profit growth.’
China Ship also pointed out in the half-yearly report, with the new ships undertaken since 2022 with relatively high prices in the previous period ushered in the delivery period, especially the bulk delivery of container ships, driving China's ship export amount to maintain a high rate of growth.
Since 2024, the price of new vessels has continued to rise under the support of sufficient hand-held orders from shipyards and limited supply of available slots; China Shipbuilding has continued to improve its production efficiency, and the number of vessels delivered and the average price of a single vessel have increased during the reporting period, with a corresponding increase in operating income.
China Shipbuilding under the Jiangnan Shipbuilding, Waigaoqiao Shipbuilding, China Ship Chengxi, Guangzhou Shipbuilding International, China Ship Diesel, Whampoa Wenchong, Chenghai Yangzhou subsidiaries and shareholding companies, the first half of the net profit of the mother of the top three are Waigaoqiao Shipbuilding 672 million yuan, China Ship Diesel's 510 million yuan, Jiangnan Shipbuilding 300 million yuan.
China ship diesel engine this midstream products of red hot also quite illustrate the industry heat, China ship said the subsidiary diesel engine segment net profit increase is larger, mainly due to the marine low-speed engine order price and gross profit margin has increased, sales scale expansion, orders increased significantly.
From the structure of new orders, in the first half of 2024, China Ship's new orders in green ship type accounted for more than 50%, medium and high-end ship type accounted for more than 70%, batch orders accounted for more than 70%; during the same period, Yangzijiang Shipbuilding achieved new orders of 79 ships, valued at 8.480 billion U.S. dollars. During the same period, Yangzijiang Shipbuilding achieved 79 new orders, valued at US$8.480 billion, of which 79% belonged to clean energy ship types.
Ren Letian, Executive Chairman and Chief Executive Officer of Yangzijiang Shipbuilding Group, said: ‘Given the accelerated regulatory developments over the past few years, the drive for energy transition remains a focal point for the maritime industry ...... We will set our sights on capacity expansion to meet the expected strong demand for clean energy vessels. ’
In August this year, a Clarkson Research study pointed out that the current fire in the shipbuilding market is also spilling over from large shipbuilding groups such as China Shipbuilding Group and Yangzijiang Shipbuilding to medium-sized shipbuilding groups. According to its statistics, the share of orders received by medium-sized shipbuilding groups in China has risen from a low of 12 per cent in 2011 to 24 per cent in 2023. The number of medium-sized shipbuilding groups has increased significantly, and there are now 15 medium-sized shipbuilding groups in China, including seven state-owned shipbuilding groups and eight private shipbuilding groups.
According to Wang Xiang, given the long cycle of the shipbuilding industry, the sustained rise in ship prices over the past few years will be more clearly reflected in profit performance over the next few years, and ‘based on current market forecasts, the profitability of the shipbuilding industry will steadily improve in the next few years’.
The shipyard's profitability expectations are also reflected to a certain extent in the capital market. To the better profitability of Yangzijiang Shipbuilding and China Shipbuilding in the capital market performance, in recent years, the share price have more considerable gains.
This round of shipbuilding industry cycle since the beginning of 2021, China Shipbuilding since 2021 to date, the stock price range rose as high as 99%, the highest position had chopped 43.43 yuan / share; Yangzijiang Shipbuilding industry during the same period of the stock price range of more than 180 per cent, the highest price of SGD 2.75 / share.
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