Recently, the three major factors of the shipbuilding industry, namely fundamentals, restructuring, and prosperity, have all changed, resulting in strong stock price performance. We will focus on updating and reporting to you:

1. Fundamentals: Ship prices continue to rise, and small and medium-sized shipowners and shipping companies have become active. Two big orders last week deserve attention. Huangpu Wenchong has 15 feeder ships with a capacity of 3,500 TEU. The single ship price is US$68 million. Compared with the Yangzijiang price, the price is "extremely attractive" (an increase of 23% from the US$55 million at the beginning of the year. The Yangzijiang quotation is at 70 million US dollars). Nantong Xiangyu received a bulk order for four 6.35w DWT bulk carriers for the first time in ten years, with a quoted price of US$34 million (an increase of 3% from the recent transaction price and 11% year-on-year). Overall, there is a clear trend that the current supply and demand relationship among global shipyards continues to be tense. The repairs of small and medium-sized shipbuilding companies have also driven up ship prices, and the orders placed by small and medium-sized shipowners have brought new incremental customers. Locking in future shipping capacity is an important risk hedging method to deal with uncertainty and rising ship prices.

2. Prosperity: The impact of the Red Sea incident has begun to be felt, and the incident is still fermenting. The Red Sea incident continues to ferment this week, and its impact has begun to be felt. The number of ships passing through the Gulf of Aden in the past four days has dropped by 43% compared with the beginning of December, with the most obvious drop in containers being about 82%. Bulk cargo and oil tankers fell by 14%/31% respectively. Freight rates on some routes have begun to rise significantly. Last week we invited industry experts to analyze that freight rates had strong upward momentum before February. Experts believe that freight rates improving for 4-6 months will have a substantial impact on shipbuilding. Over the weekend, Iran warned that other waterways such as the Mediterranean Sea and the Strait of Gibraltar may also be closed, and the scope of the situation is still expanding.

3. Reorganization: Last week, Heavy Industry announced a penalty notice, and the case is close to being reorganized. Last week, Reorganization Angle Heavy Industries announced a penalty notice. We expect to announce the conclusion of the case before New Year's Day, and the reorganization is approaching.

[Key points of the shipbuilding industry expert meeting]

1. Ship prices: The current ship prices are the highest monthly since the last peak in October 2008. The current ship prices reflect the relationship between supply and demand. As long as the supply side does not significantly expand production capacity, there is no problem for ship prices to continue to remain high or even rise slightly. , because shipyards can build different ship types, so in fact, when the price of one ship type increases, the possibility of other ship types falling in price is low. In the last cycle, a large amount of production capacity was added, but this round may only tap the potential of shipyards and return sporadic shipyards. Substitution issues in Southeast Asia and India were considered before, but at present, the substitution capabilities are actually limited (technical and supply chain barriers).

2. The driving role of shipping emission reduction: IMO and the European Union have proposed plans for emission reduction, with the goal of achieving a 40% carbon emission reduction and a 30% greenhouse gas emission reduction in 2030; a 70% emission reduction in 2040; and achieving net-zero emissions in 2050; Such requirements put great pressure on shipowners. The European Union will implement a shipping carbon tax on January 1, 2024. The emissions of a single ship will be counted in 2024, and the tax will begin to be collected in 2025. The carbon emission tax will be 40% in the first year, and may be 100% in a few years. The requirement to reduce emissions is an important reason for the boom in the new shipbuilding market. The peak of the previous wave of orders was from 2005 to 2008, and the peak of ship delivery was from 2008 to 2012. About 50,000 ships were delivered within five years (which is half of the existing fleet. The current global ocean-going ship production capacity is about 3,000 ships). Until now, The age of this wave of ships is about 15 years or even longer. Ships older than 15 years have begun to enter the second half (meaning the probability of dismantling increases). They have caught up with the renewal and replacement cycle, and with the addition of environmental protection and emission reduction policies, they will enter the replacement cycle.

3. Market space by ship type: In terms of absolute transaction value, the major ship types of oil tankers, bulk carriers, gas ships and container ships have similar proportions this year. Oil tankers account for the highest proportion, about 23%, gas ships about 21%, and bulk carriers about 21%. 20% of cargo ships, 17-18% are container ships, and the rest are special ships. Now all ship types are being ordered according to the shipping company's strategic adjustment. For the medium and long-term layout, shipping emission reduction requires all ship types to reduce emissions.

4. The route of new energy ships is determined: It seems that IMO or the European Union will not define which fuel the new energy ships will eventually use (LNG is an alternative transitional fuel). The power solution that can be provided to ocean-going ships is provided by the main engine factory (shipowners) I rarely mention technical routes). The only low-speed engines used in large ships in the world are MAN ES and WinGD, which provide technical routes for methanol (basically commercialized in 2024) and ammonia (expected to be commercialized in 2025). There is also discussion about civilian nuclear energy, but this is at an earlier stage. Nowadays, many ships are choosing ships with reserved capacity, that is, the engines have the ability to be modified. After the new energy source is ordered, it only takes 1-2 months to modify the ship with reserved capacity, and then use the corresponding fuel.

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