Ten years of lost oil market is expected to open a boom cycle?

category:Finance
 Ten years of lost oil market is expected to open a boom cycle?


The sanctions imposed by the U.S. Treasury Department did not have a lasting impact on the A-share oil transport sector. On the day of COSCOs suspension, the share price of the merchant ship was disturbed, but it rose rapidly in subsequent trading days. In addition, COSCOs resumption of trading, despite two consecutive days of decline, has now stabilized and rebounded.

In view of the soaring oil transport sector, some researchers believe that the underlying reason is that under the background of Sino-US trade frictions, the logic of national cargo transport, national ship manufacturing and self-control will be further strengthened; of course, many institutions are optimistic about the recovery of the oil transport sector. On the one hand, oil transport prices will enter an upward channel, on the other hand, the supply and demand structure of oil tanker transport capacity will begin. Improve.

Oil transportation or opening

A New Rising Cycle

Like all cyclical industries, price and supply and demand structure are decisive factors in the prosperity of the oil transport market.

As far as oil transport price is concerned, data statistics show that in the past 30 years from 1990 to now, freight price has undergone three price changes. Oil transport of $40,000 is generally regarded as the break-even point of oil transport. Therefore, the three-round freight price changes are divided by $40,000.

During the downturn period from 1990 to 1999, oil freight rates were below $40,000 in almost every year, while during the boom period from 2000 to 2009, they were generally above the balance point of $40,000. In December 2014 and January 2018, oil freight rates reached historical highs of $188,000 and $197,000 respectively.

At present, the share price of A-share oil transportation listed companies keeps rising. The background is that after the last boom cycle, the oil transportation market has survived another 10-year downturn. In the past 10 years, in 2012, 2013 and part of 2018, the oil transportation price has touched the freezing point of less than $10,000.

From the above 30 yearsfreight situation, if we take 10 years as a cycle, Huachuang Securities judges that 2018-2019 has already belonged to the end of the oil transportation downturn cycle, and the oil transportation price has established the inflection point in the fourth quarter of 2018, and the freight rate in the fourth quarter of 2019 is expected to rise to a new level year on year.

In addition to price analysis, the supply and demand structure of the oil transport market seems to support the arrival of a new cycle of prosperity.

In terms of supply, new shipbuilding orders are at a lower level than last year, and capital expenditure tends to be rational. At the same time, due to the installation period of desulfurization tower and the increase of dismantling capacity, supply pressure of oil transport capacity is expected to decrease. In terms of demand, global sea transport turnover is expected to increase due to the continuous increase of U.S. crude oil exports and the two times higher distance between the United States and the Middle East.

Freight and supply and demand represent the fundamentals of the industry. An industry researcher also told the Securities Times, In the medium and long term, the fundamentals of the oil market are better than those of the past few years. In addition, he mentioned some of the current incidental disturbances, including Irans seizure of British tankers and the Gulf sanctions.

CICC mentioned in a recent report that the oil transportation cycle bottomed out in the fourth quarter of 2018. The judging feature is that the freight rate in 2018 is close to a 30-year historical low, and the ship demolition volume has reached a new high since 2003. According to the judgment of CICC, the oil transportation plate will be upward in a definite period for at least one year in the future.

The U.S. Treasurys sanctions on COSCOs offshore subsidiary may be an important factor in triggering the rebound in the share prices of the listed companies. For trade frictions, CICC said that the current status of trade frictions has been reflected in the market, while further upgrading and new tariffs have little additional marginal impact on oil demand.

A-share Oil Transport Listed Companies

Strong in strength

Merchant ship and COSCO are the two most authentic oil transport targets of A-share. In the background of good oil transport market, institutions have also paid more attention to the two companies. Reporters noted that the strength of the two companies is also quite strong.

First of all, the company has 176 vessels with an average age of 6.58 years, with a total capacity of 32.08 million tons, up to the first half of this year. Among them, VLCC and VLOC fleets rank first in the world and Ro-Ro fleets rank first in China. Business involves oil transportation, dry bulk cargo and LNG transportation.

Merchant Steamship believes that the company is expected to further establish its position as a leading shipping company in the world through integration and self-development. At the same time, it will benefit from the support of China Merchants Group and Sinopec and other shareholders.

Comparatively speaking, COSCOs business is more focused on energy transportation, involving international and Chinese coastal crude oil and product oil transportation, international liquefied natural gas (LNG) transportation and so on.

COSCO Haineng said that according to the scale of transport capacity statistics, the company is the worlds largest oil tanker owner. Up to the first half of this year, the company has 151 tankers with 21.88 million tonnes of carrying capacity, of which 137 have their own capacity, 19.92 million tonnes of carrying capacity; 14 have rented capacity, 2.87 million tonnes of carrying capacity. Another order capacity of 16 ships, 3.06 million tons.

COSCO Haineng also mentioned that in the field of coastal crude oil transportation, the company has maintained a leading position in the industry and more than 55% of the market share. After completing the acquisition of PetroChina product fleet in March 2018, the company has leaped to be the leading enterprise in the coastal product oil transportation market.

As mentioned above, many institutions are optimistic about the performance potential of the two companies in the context of the recovery of oil transportation prosperity. For example, Fortune Securities points out that the coming into force of the sulfur restriction convention will have an impact on the effective capacity of tankers and dry bulk cargo. Davis is expected to double-hit during the peak oil season (the fourth quarter). It is estimated that China Merchant Ships will achieve net profits of 1.476 billion yuan, 2.441 billion yuan and 2.855 billion yuan from 2019 to 2021, respectively.

For COSCO Haineng, Huachuang Securities estimates that every 10,000 US dollars increase in freight price will bring about a profit increase of about 1.2 billion yuan. Therefore, when the freight price is 30,000 US dollars, 40,000 US dollars and 50,000 US dollars, they will contribute 200,000,000 yuan, 1.4 billion yuan and 2.6 billion yuan respectively to the foreign trade sector, with great flexibility. It is worth mentioning that since this year, the oil sector has experienced a round of rise, investors are very concerned about the current valuation of the oil sector. CICC points out that, by comparison, the current valuation of shipping companies is at a historical low and far below the historical average. Stable profitability business to provide security cushion should help to enhance the valuation center. In addition, CICC believes that, compared with international comparable companies, the valuation of Chinas shipping state-owned enterprises is on the upper side, but it is reasonable: first, Chinas state-owned enterprises are financially sound and have a lower risk of bankruptcy; second, due to the active development of stable profitability business model in the past few years, the performance safety cushion is formed, and shipping enterprises are also profitable in extremely depressed market conditions. Source: Responsible Editor of Securities Times: Yang Qian_NF4425

For COSCO Haineng, Huachuang Securities estimates that every 10,000 US dollars increase in freight price will bring about a profit increase of about 1.2 billion yuan. Therefore, when the freight price is 30,000 US dollars, 40,000 US dollars and 50,000 US dollars, they will contribute 200,000,000 yuan, 1.4 billion yuan and 2.6 billion yuan respectively to the foreign trade sector, with great flexibility.

It is worth mentioning that since this year, the oil transport sector has experienced a round of gains, and investors are very concerned about the current valuation of the oil transport sector. CICC points out that, by comparison, the current valuation of shipping companies is at a historical low and far below the historical average. Stable profitability business to provide security cushion should help to enhance the valuation center.

In addition, CICC believes that, compared with international comparable companies, the valuation of Chinas shipping state-owned enterprises is on the upper side, but it is reasonable: first, Chinas state-owned enterprises are financially sound and have a lower risk of bankruptcy; second, due to the active development of stable profitability business model in the past few years, the performance safety cushion is formed, and shipping enterprises are also profitable in extremely depressed market conditions.