Orient: The oil shipping industry may accelerate the dismantling of old ships, with improvements in supply and demand driving the economy to continue to rise.

Orient released a research report stating that the US attack on Iran will accelerate the realization of geopolitical options, with mid-term attention on excessive reconstitution demand due to energy security concerns. The increase in oil production by 2025 and sustained sanctions will significantly boost industry prosperity. Since 2026, the acquisition activities of VLCCs by Longjin Shipping have significantly increased industry concentration. The US attack on Iran will accelerate the realization of geopolitical options. Short-term prosperity will depend on the duration of the closure of the Strait of Hormuz, while mid-term excess replenishment triggered by energy security concerns may drive oil transportation demand upwards to hedge against supply increments. Furthermore, if sanctions against Iran are lifted in the future, the industry may accelerate the decommissioning of old ships. The bank predicts that the supply and demand of oil transportation are expected to continue to improve, driving prosperity upwards. Orient's main points are as follows: Oil transportation: Amid the US-Iran ceasefire, negotiations have entered a stalemate, with uncertain variables for the passage of the Strait of Hormuz. On April 8, 2026, Iran, the US, and their allies agreed to a ceasefire, and Iran announced that it would start negotiations with the US in Islamabad for two weeks starting on the 10th. Influenced by the mid-week ceasefire and negotiations, Iran has relaxed restrictions on the flow of the Strait of Hormuz, with last week's passage volume continuing to improve and the number of passing ships slightly increasing compared to the previous week. At the same time, according to MarineTraffic satellite images, two Chinese VLCCs successfully passed through the Strait of Hormuz on the evening of the 11th. Negotiations between the US and Iran entered a deadlock on the evening of the 12th, with Trump proposing to block the Strait of Hormuz. It is necessary to continue monitoring the subsequent passage of the strait. Last week, VLCC rates remained at a high level, with Middle East-China VLCC TCE rising to $450,000/day. Rates for US Gulf to China and West Africa to China TCE remained at around $125,000 and $110,000/day, respectively. Last week, smaller ship rates slightly fell, with Suez and Aframax TCE at $230,000 and $200,000/day, respectively. The bank predicts that the Middle East-China VLCC TCE may remain at a high level in the future with the support of SPR releases. Ignoring the extreme tail risk of long-term closure of the Strait of Hormuz and its economic impact, future demand increment mainly comes from two aspects: 1) Reconstitution of strategic inventories. The US Department of Energy has arranged to replenish approximately 200 million barrels of the strategic reserve over the next year 20% more than the extraction volume. Considering that the US is an oil-producing country, the boosting effect of inventory replenishment on shipping volume depends on the proportion replenished by shipping. Inventory replenishment in oil-consuming countries like Japan, South Korea, and the EU through seaborne imports is expected to directly drive oil transportation demand. 2) Excessive reconstitution demand from oil-consuming countries due to energy security concerns. The interruption of the passage through the Strait of Hormuz has greatly increased the attention of traditional energy-consuming countries to energy security. In the process of ensuring energy security, energy diversification takes time, and the replenishment of traditional energy stockpiles on top of extra inventory consumption caused by the strait interruption may further increase to address future uncertainties. Historical inventory replenishment and replenishment are related to prices. If conflicts are resolved and oil prices quickly drop to a lower level, it may accelerate the occurrence of reconstituted demand. Dry bulk: Post-Easter volume recovery drives significant increase in BDI The BDI weekly average last week was +5.7%, with the dry bulk market seeing a rise in prices following improved volume post-Easter. The BCI weekly average last week was +6.9%, with improved Australian iron ore volume driving a price rebound. The BPI weekly average last week was +3.8%, mainly driven by improved coal and grain volumes. The bank believes that the dry bulk market is expected to drive growth in volume and ton-mile beyond expectations under the increase in production from the Western Australia mines, with prosperity likely to stabilize and rise. Attention should be paid to the long-term impact of a blocked passage through the Strait of Hormuz on the real economy. Container shipping: Comprehensive freight rates relatively stable, with Europe routes continuing to decrease and US routes rebounding The Chinese container shipping market is generally stable, with divergent rate trends. Both the US West Coast and East Coast recorded significant increases, while the Europe-Mediterranean route continues to decline slightly due to weak fundamentals. 1) European routes: SCFI Shanghai-Europe route was down by 6.2% compared to the previous period. Shanghai-Mediterranean route was down by 3.5%, with a lack of momentum for further growth in transport demand leading to a continuous decline in rates. 2) North American routes: SCFI US West and East Coast routes were up by 8.2% and 4.9% respectively compared to the previous period. Last week, transport demand was stable overall, with a solid supply and demand fundamental leading to a continuous rise in rates. In the coming years, container shipping on European and American routes will face challenges, with attention needed on the impact of a blocked passage through the Strait of Hormuz on the economies of Europe and the US. It is recommended to continue monitoring structural growth and opportunities in the container shipping market. Risk warnings: Risks of economic fluctuations, geopolitical situations, oil price risks, safety accidents, etc.