Core view
1. Dry bulk freight is a typical strong cycle industry, and its business model is weak in stability and expansibility. The concentration of commodity production and marketing places determines the point-to-point transportation mode of dry bulk cargo, which has weak scale effect and low threshold. The characteristics of short-term supply rigidity and low entry threshold jointly determine that it belongs to a strong cycle industry. The large cyclical fluctuation of freight rate and huge pre capital expenditure determine the instability of the business model, that is, the phenomenon of buying ships at a high point and putting into operation at a low point can be found everywhere; At the same time, the homogenization and weak scale effect of transportation services restrict their volume and price, making it difficult for a single company to expand on a large scale and improve the industry concentration.
2. The dry bulk freight cycle is characterized by freight rate fluctuation, long-term science and technology, short-term supply and demand and liquidity. In the long run, due to its weak bargaining power, the dry bulk freight industry is difficult to enjoy the benefits brought by the improvement of efficiency in the development of science and technology, but continues to transfer benefits to supplement the price with quantity. In the medium and short term, the dry bulk freight rate can quickly reflect the change of the growth difference between supply and demand, reflecting the characteristics of its quasi perfect competitive industry. After 2000, the financial attributes of bulk commodities and dry bulk freight are stronger than before, and financial instruments will amplify freight rate fluctuations in some cases.
3. At present, the dry bulk freight industry is likely to be in a tight balance between supply and demand. In the medium and short term, it will be in a weak situation of both supply and demand. In the process, there may be a periodic mismatch between supply and demand, causing a short-term market. It is necessary to closely track relevant disturbance factors.
Supply side: at present, the number of hand-held orders and new orders of dry bulk carriers are at the bottom of history, and the number of potential ship dismantling is greater than the number of hand orders. At the same time, the environmental protection restriction policy has further suppressed the supply of transport capacity. Therefore, the overall transport capacity is difficult to expand in the short term, and the supply growth rate is expected to decline.
Demand side: on the whole, the global manufacturing industry continues to expand, but China has begun to shrink. ① Iron ore: China’s seaborne import of iron ore accounts for 76% of the global seaborne trade of iron ore. due to environmental protection and real estate policies, the production capacity of China’s iron and steel industry has declined, the steel consumption has decreased, and the demand for iron ore has weakened significantly; ② Coal: as the world’s largest coal producer and consumer, China’s dependence on imported coal is weak, and the dual control policy of energy consumption will further limit the expansion of China’s coal imports.
Investment suggestion: focus on China Merchants Energy Shipping Co.Ltd(601872) (601872. SH)
Risk tip: the energy consumption dual control policy is stronger than expected; The pace of energy structure transformation exceeded expectations; The progress of economic recovery is less than expected; The infrastructure construction progress of the United States and India is less than expected; The Fed’s interest rate hike process exceeded expectations.
