Shenwan Hongyuan: The high prosperity of oil transportation is transmitting to shipbuilding; new ship prices are expected to end the divergence and rebound overall.

Shenwan Hongyuan released a research report stating that the current one-year charter rate for VLCCs has risen to $140,000 per day, reflecting a tight market supply and sustained high levels of shipbuilding activity. The five-year second-hand ship prices in the VLCC market have surpassed the prices of newbuilds, and there is a trend of increasing BACK structure, indicating shipowners’ optimistic outlook for the future, which is expected to accelerate new ship orders. From November 2025 to February 2026, the prices of new tankers have seen four consecutive months of month-on-month growth, with different ship types sharing shipyard capacity, among which the high density of tanker orders is expected to drive an overall increase in newbuilding prices.

The main points from Shenwan Hongyuan are as follows:

The buoyancy of the tanker market is accelerating to shipbuilding: The VLCC spot freight rates and charter rates remain high, with second-hand ship prices continuing to rise, indicating that the buoyancy is expected to accelerate.

The spot freight rates and charter rates for tankers have surged significantly, with second-hand ship prices continuing to rise, reflecting a high level of market activity. The supply side of the oil transportation market is strongly constrained, and there is a changing logic in the demand side regarding black oil and compliant oil structures; the mid-cycle upward trend is relatively strong. The current one-year charter rate for VLCCs has risen to $140,000 per day, reflecting tight market supply and sustained high levels of activity.

Under high levels of activity, shipowners are accelerating orders, with tankers being the main contributor to new shipbuilding contracts for two consecutive months.

Hengli Heavy Industry is the most direct beneficiary of the explosion in tanker orders, possessing strong order-taking capabilities. Hengli Heavy Industry holds the largest number of VLCC orders globally. Currently, most mainstream shipyards are saturated in capacity, while Hengli Heavy Industry, which is in a capacity ramp-up phase, has outstanding order-taking capabilities. Since 2026, Hengli Heavy Industry has signed over 40 new VLCC contracts, with the amount of orders held rapidly increasing from $19.5 billion at the beginning of the year to $26 billion, making it the most direct beneficiary in the shipbuilding sector under high market activity.

The capacity to continue taking orders is sufficient: Currently, Hengli Heavy Industry still has production lines under construction that have not yet been launched, and the multi-ship construction model raises the capacity ceiling. The existing orders held do not fully cover future production capacity, providing the ability to continue taking orders. Second-hand ship prices are continuously rising, and the value term structure of some ship assets has entered a BACK structure, with signs of stabilization in newbuilding prices, which are expected to rise in the future.

Second-hand ship prices: Prices of some second-hand ship types are continuously rising, and the asset value term BACK structure is intensifying.

The second-hand ship price index has been rising since February 2025, with a continuous increase for 12 months. The five-year second-hand ship prices in the VLCC market have surpassed newbuilding prices, and there is an intensifying trend of BACK structure, reflecting shipowners’ optimistic attitude towards the future, which is expected to accelerate new ship orders.

Newbuilding prices: Tankers are the first to enter an upward trend, which is expected to drive the overall ship price index higher.

From November 2025 to February 2026, the prices of new tankers have seen four consecutive months of month-on-month growth, and the sector’s activity is expected to continue. Bulk carriers have not seen a surge in orders this round, with severe aging of the fleet and sufficient replacement demand. Container ships have now entered a new arms race, with continuous order-taking capabilities being underestimated. Different ship types share the capacity of shipyards, and the high density of tanker orders is expected to drive an overall increase in newbuilding prices.

In terms of targets:

China Shipbuilding (600150.SH) and China Ship Defense (00317) have order amounts of approximately $66.4 billion and $9.1 billion, respectively, with market value to order ratios of 0.51 and 0.28 times, which are at historically low levels. Attention is drawn to ST Songfa (603268.SH), Sumec (600710.SH), Yangtze River, and China Power (600482.SH).

Risk warning:

New orders for civil ship business may fall short of expectations; a decline in shipping activity; significant increases in steel prices and other raw materials/RMB appreciation; competition in the industry may intensify as countries in Southeast Asia and other nations enter the market.

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