Guotai Haitong: Maintain a buy rating on oil transportation and watch for opportunities to position against the market trend.

Guotai Haitong released a research report stating that the utilization rate of oil transportation capacity has reached a threshold, and the central transport price has risen, indicating an increase in price volatility. In the coming years, the supply and demand for oil transportation are expected to improve, and the central transport price is expected to continue to rise. It is recommended to pay less attention to short-term fluctuations and focus on the trend of the central transport price. The bank predicts that the supply and demand for oil transportation will continue to improve in the next two years, and also have the option of falling oil prices. Oil transportation companies have sufficient profit elasticity and will benefit fully from the improving oil transportation prosperity. The market is expected to rebound from a low point, with dividend yields supporting the valuation floor and a risk-return ratio becoming more attractive, while geopolitical situations may provide opportunities for contrarian investments. Guotai Haitong's main points are as follows: Price tracking: Crude oil prices remain high, countermeasures to alleviate the impact on shipyards and shipping companies 1) Crude oil transportation: Last week, the VLCC-TCE on the Middle East-China route maintained a level of over 80,000 US dollars, and shipowners' sentiment continued to be high. China's countermeasures against the US Section 301 sanctions may lead to tenants choosing non-US ships, resulting in a reduction in effective shipping capacity and an increase in transport prices in the China-US related shipping market. 2) Refined oil transportation: The TCE of MR's new Australian route continues to exceed 20,000 US dollars, driven by the soaring prices in the western market, with prices stabilizing and rising recently, hitting a high in 2024 and expected to improve year-on-year by 2025. 3) Bulk cargo transportation: The impact of China and the US imposing port fees on relevant ships has caused a significant rise in FFA contract prices, driving spot prices, with future attention on increased production at remote mines. 4) Container shipping prices: Pressure on volume in the off-peak season, with shipping companies announcing rate increases in November, leading to continuous price increases for two weeks. Shipping: Continued impact of tariff policies, focus on alliance restructuring and differentiation In the past five years, there have been two rounds of high prosperity, with profit bases rising. In the first half of 2025, tariff frictions intensified, and the US route experienced a backlog of exports and a wave of shipments, with the sustainability of prosperity depending on tariff and economic expectations. In the coming years, the mainline market will face further ship enlargement and supply pressure, with the impact of trade frictions continuing. Attention should be paid to the restructuring and differentiation of shipping alliances and the reshaping of the global trade landscape. Oil transportation: Increased crude oil production favors demand and has the option of falling oil prices Prosperity is expected to rise in the first half of 2022-24. In the second half of 2024, it will undergo stress tests, and since 2025, it has benefited from the central decline in oil prices and the escalation of Iran sanctions, with the central transportation price significantly rebounding. Global crude oil supply has entered a production growth cycle, reaffirming that increased crude oil production is favorable for oil transportation demand. The rigidity of oil tanker supply continues, and in the next two years, the supply and demand for oil transportation will continue to improve, with the option of falling oil prices. Bulk cargo: Increased iron ore production favors demand, and prosperity is expected to gradually recover Recovery growth after the pandemic in 2023-24 will drive a moderate increase in prosperity. In the first half of 2025, recovery growth in demand will end, combined with some steel mill production reductions, leading to a corresponding decline in the central transport price. The global iron ore production cycle has begun, especially with the imminent commissioning of the West Montau Super Large Project, anticipating demand growth exceeding expectations. With low supply growth expected in the next few years, prosperity is expected to gradually recover. Risk warning Economic risks, changes in geopolitical situations, risks related to environmental policy implementation, etc.