COSCO Haikong Seized 15.4 Billion Ship Owners To "Buy, Buy" In The First Quarter

"It is estimated that the net profit attributable to shareholders of listed companies will be about 15.45 billion yuan in the first quarter of 2021." On the evening of April 6, COSCO Haikong (601919. SH) released its performance forecast for the first quarter of 2021. As the profit in the same period of last year was only 292 million yuan, which means that the profit in this quarter has increased by nearly 52 times.

The beautiful report card greatly exceeded market expectations. As soon as the opening of the trading on April 7, COSCO Holdings Limited increased its trading limit in A-share market and soared by 29.11% in Hong Kong stock market. The stock prices of a number of shipping stocks took off from two places, including long-distance shipping Phoenix, COSCO Haifa, COSCO Haite, Ningbo shipping, etc., and COSCO Haineng, China Merchants Steamship, CIMC group and Sinotrans also rose sharply. Shipbuilding and port plate closely linked with shipping also rose to varying degrees on the same day.

As a matter of fact, in March and April this year, orders for new ships continued in the shipbuilding market, and the port performance could not help but make people wonder whether a new shipping cycle is brewing.

Huatai Securities believes that as a typical cyclical industry, the container transportation market is entering an upward cycle after years of industry downturn from 2009 to 2016. The global supply chain was disrupted by the epidemic, which further strengthened the supply and demand fundamentals and pushed up freight rates.

Is this a small band cycle or a long period from 2003 to 2007? In an interview with the 21st century economic report, Zhang Shouguo, executive vice president of China Shipowners Association, pointed out that the current boom had short-term behavior caused by temporary factors, and its foundation was not solid enough to form the long bull cycle in 2003. He predicted that container prices would decline after the third quarter.

Outbreak of container transportation market: aggravating port congestion

Why did the first quarter report card exceed market expectations?

Huachuang Securities pointed out that at present, the supply and demand of shipping market is still tense. Since the beginning of this year, the structural shortage of containers has improved, and the spot freight rate is still at a high level. The reason behind this is that under the high demand, the shortage of systematic shipping and land transportation capacity at the supply side, such as terminals, railways, and frames, is still continuing.

European and American replenishment of inventory and fiscal policy stimulation have led to strong demand for container transportation in Q1 this year. The container throughput growth rates of the eight major hub ports in China from January to March were 6.8%, 37.9% and 12.9% respectively, and the weekly import container volume of Los Angeles port at the import end basically maintained above 110000 TEU. However, in terms of wharf, on April 5, 7 ships were pre anchored and 15 ships were in Anchorage status. The average anchoring time increased from 7.5 days in early March to 8.0 days, and the congestion was aggravated. At the same time, according to pmsa statistics, the detention time of the US West Railway from January to February was 7.9 and 8.6 days respectively. The pool of pools estimates that the current 40 / 45ft. Trailer stay time at the wharf and warehouse / street is 3.5 and 6.8 days respectively in San Pedro Bay. Meanwhile, the harbor Trucking Association predicts that the average turnaround time of container trucks in Los Angeles Long Beach port will increase from 84 minutes in November 2020 to 88 minutes in February 2021, and the detention time will also increase.

COSCO Haikong also explained that the container shipping market continued to improve in the first quarter of this year. The average value of China's export container freight composite index (CCFI) was 1960.99 points, up 113.33% compared with the same period of the previous year and 53.8% compared with the fourth quarter of the previous year. Meanwhile, the company continued to make every effort to guarantee global transportation services by increasing transportation capacity, ensuring supply containers and providing services, so as to realize the simultaneous increase of volume and price, and the overall performance was significantly increased compared with the same period of last year.

Therefore, according to the preliminary calculation of COSCO Haikong, the net profit attributable to the shareholders of the listed company is expected to be about 15.45 billion yuan in the first quarter of 2021, and the net profit attributable to the shareholders of the listed company after deducting the non recurring profit and loss is about 15.406 billion yuan.

This single quarter record, not only far higher than last year's annual profit level, even close to the 2007 annual profit peak of 19.1 billion yuan.

However, this achievement may not be the highest single quarter performance. With the consolidation and transportation industry gradually walking out of the off-season, the volume of goods picked up, and the impact of the Suez Canal grounding is still fermenting. According to Maersk, the Suez Canal grounding incident will directly lead to a 20% - 30% reduction in transportation capacity in April. Recently, the SCFI index has begun to stabilize and recover slightly.

Chen Shuai, deputy general manager of COSCO Haikong, pointed out that according to the current data, the US retail inventory is at a low level. Therefore, the U.S. economic stimulus plan will drive relevant businesses to replenish inventory, thus increasing the import volume. So the popularity of Pacific routes may continue into the third quarter of this year.

Another factor that must be noted is that at present, the contract price of the US line and the European line is gradually landing. Dong Mi Guo Huawei of COSCO Haikong disclosed on April 7 that the 2021 agreement negotiation is still in progress. Many institutions speculate that the contract price will nearly double this year compared with the same period last year. "Assuming that the container volume of Q2's European and American lines is 1.4 million TEU, we estimate that the increase of contract price will contribute more than 6 billion incremental profits to the company in a single quarter." Considering that the contract price of Q2 in the new year starts to realize the performance growth, and Q2 gradually enters the peak season of the industry, COSCO haicon's performance may not be weaker than that of Q1.

Shipowners buy and buy ships

COSCO's performance report is just the prelude to many shipping companies' good news. Clarkson Plato securities has previously predicted that Maersk's operating profit in the first quarter of this year may exceed $6 billion, and the full year operating profit will reach $10 billion in 2021.

In addition, in the past year, major shipping companies have reaped substantial profits, and the prosperity of the upstream and downstream industries has also increased. On April 7, Shanghai International Shipping Research Center released a report on China's shipping prosperity in the first quarter of 2021. The index of China's shipping prosperity reached 117.92 points in the first quarter, entering a relatively prosperous range; China's shipping confidence index was 165.08 points, a sharp increase of 23.93 points compared with the previous quarter, entering a stronger boom range, setting a record high in history.

Zhou Dequan, director of the compilation Office of China's shipping prosperity index, introduced that when the shipping market is in a downward cycle (2011-2016), China's shipping confidence index is generally lower than China's shipping prosperity index. When the shipping market is in a recovery cycle (2017-2019), China's shipping confidence index is generally higher than China's shipping prosperity index. According to the above rules, since the fourth quarter of last year China's shipping confidence index is significantly higher than China's shipping boom index, and China's shipping industry is in the best recovery period in history.

We are generally optimistic about the market, and many shipowners have started to buy ships. According to alphaliner's estimation, as of March 20, the global order volume of newly built container ships was about 401, totaling 3.63 million TEU, accounting for 15.3% of the total global container ship capacity, far higher than the single digit level in previous years.

But this figure does not include the shipbuilding plans recently announced by several shipping companies. Wanhai invested 1.053 billion US dollars to build nine 13000 Tue container ships, evergreen spent 2.3-2.6 billion US dollars to build 20 150000 TEU Container Ships, and China Shipping Engineering Co., Ltd. invested 10 billion yuan to place 13 16000 Tue container ships in the subsidiary company of China shipping. Recently, it has been reported that Dafei is in-depth negotiating on new ship orders, and plans to order 3 + 3 LNG powered 13000 TEU Container Ships in Hudong Zhonghua and Jiangnan Shipbuilding respectively, with the cost of each ship about 140 million to 145 million US dollars, and the total value of the alternative orders will reach 1.74 billion US dollars (about 11.403 billion yuan).

Zhou Dequan disclosed that the center also conducted a relevant investigation on the planned new capacity of shipping enterprises in 2021. According to the survey, 15.92% of the enterprises said that they expected new ship orders to account for more than 10% of the company's total transportation capacity; 23.57% of the enterprises said that they expected new ship orders to account for 5% - 10% of the company's total transport capacity; 5.73% of the enterprises said that they expected new ship orders to account for less than 5% of the company's total transport capacity; 24.20% of the enterprises said that they would not consider making new ships and maintain the existing capacity level; only 17.83% of the enterprises said they would not consider making new ships Shipping will even reduce part of the company's transportation capacity.

New cycle or short-term fluctuation?

The linkage between the consolidation market and the shipbuilding market vaguely has the shadow of the 2003 shipping bull market cycle. Xu Lirong, chairman of COSCO Shipping Group, said on April 7 if he would like to keep up with this round of shipbuilding trend, "at present, there are not many real shipowners placing orders for shipbuilding, and the increase of new ships is in line with the market law." In fact, COSCO Haikong placed 12 orders for new ships last year. Considering the annual growth of the industry and the demand for fleet renewal, it is generally believed that the "healthy" level of orders held by COSCO Shipping industry is between "14% and 17%. In the past few years, under the market clearing, hand-held orders once had only a single digit.

However, Xu Lirong also said that "COSCO marine control must be one of the scale leaders in the liner industry. Therefore, we hope that the current scale efficiency can play a greater role in the future market." This statement seems to be unwilling to give up a new round of large-scale battle of liner giants.

As for this round of craziness in the consolidation market, Zhang Shouguo reminds that there was a similar short-lived market rebound in 2010. At that time, the global market was severely damaged by the financial crisis. After China put forward the four trillion rescue measures and the European and American governments successively rescued the market, the shipping market rebounded for half a year in 2010. At that time, many shipping companies thought that the market had recovered and continued to place new orders, which led to this After the market fell into a five-year downturn, a large number of airlines went bankrupt.

Zhang Shouguo believes that although the current shipping market is moving towards a long-term positive trend, the tension in transport capacity and the rebound in freight rates since the second half of last year are caused by very special factors and are not sustainable. "The overall transport capacity of the market is still surplus", Zhang Shouguo believes that shipbuilding enterprises should pay more attention to fundamentals than to pursue short-term benefits, so as to let the market fall into a quagmire again.