China Securities Co., Ltd.: Ship traffic volume in the Strait of Hormuz remains very low, emphasizing the long-term trends in the oil shipping industry.

China Securities Co., Ltd. published a research report stating that since the closure at the end of February, only a very small number of special ships can now pass through the Strait of Hormuz, with the overall situation being almost completely closed. There are only two states: extreme closure and very limited passage. If there are no new ship orders in the future or only a small number of orders, the large cycle in the oil shipping industry may continue until 2029-2031. The volume of traffic through the Strait of Hormuz has sharply declined. Since the closure at the end of February, there were 140 ships passing through the strait on a normal day. Currently, only a very small number of special ships can pass through, with the overall situation being almost completely closed. It is important to stop predicting war and political rhetoric and focus on the real trade impacts such as crude oil and finished oil inventory consumption. It is crucial to monitor the daily ship traffic through the strait, as the duration of the closure directly determines the extent of the global reduction in crude oil and finished oil inventories, with longer closures posing higher systemic risks globally. Oil shipping rates follow a three-stage logical progression: rates first rise during times of conflict and chaos, then ships are re-allocated to the U.S. Gulf and West Africa, lengthening transport distances and pushing rates higher. After the strait is reopened, global crude oil procurement may drive rates up for over two months. If there are no new ship orders in the future or only a small number of orders, the large cycle in the oil shipping industry may continue until 2029-2031. The industry has strong structural support: global shipyard capacity has shrunk by 40% from its peak, combined with a shortage of labor creating capacity bottlenecks; the VLCC fleet is significantly aging, with future new ship orders only able to replace a small number of old ships, leading to a gap in capacity; shadow fleets struggle to enter mainstream compliant markets, while lengthening transport distances, ships being stuck in the strait, and capacity stopping further consume effective capacity. In addition, Changjin Shipping and Frontline have both expanded their capacity early, which may affect market structure.