Guotai Haitong: Maintains "Overweight" Ratings on Aviation and Oil Shipping; Industry Expects Oil Shipping Boom to Be Sustainable in the Medium Term

Guotai Haitong released a research report maintaining an "Overweight" rating on aviation and oil shipping. 1) Aviation: Geopolitical oil prices do not change the long-term logic of the super cycle. With oil prices at highs + load factors at highs + ticket prices at lows + share prices at lows, attention should be paid to bottom-fishing opportunities in aviation. 2) Oil shipping: Dark fleet channels opening up have driven recent freight rates to repeatedly hit record highs, while geopolitical conflicts have strengthened the medium- to long-term logic. Continue to recommend as a key focus. The industry expects geopolitical conflicts to likely persist, tanker operating efficiency losses to continue, and restocking over the next two years to be a certainty, with the oil shipping boom expected to be sustainable in the medium term and also carrying an option on unexpected upside in compliant demand from Iran sanctions relief. Recently, one-year and three-year time charter rates have risen to US$300,000/day and US$110,000/day, reflecting optimistic medium-term expectations from industry participants, which will secure the dividend appeal of oil shipping companies and support the valuation floor. The report flags another good opportunity to position in oil shipping. Guotai Haitong's main views are as follows: Aviation: Airlines are controlling capacity to support prices, while exhibition-driven business travel demand ensures fuel-inclusive ticket prices continue to rise year on year. Airlines have continued their strategy of controlling capacity to support prices during the off-season, a positive improvement over their summer strategy. The bank estimates that air passenger traffic in mid-to-late October fell about 5% year on year, with international route traffic maintaining positive growth; load factors edged down year on year as airlines lowered load factor targets; domestic fuel-inclusive ticket prices are estimated to have maintained significant year-on-year increases, with recent exhibitions supporting strong business travel demand. It is expected that airlines will continue to rationally reduce operating rates in the new season and enhance ticket price pass-through of oil prices. Under high oil prices in 2026Q3, weak business travel demand and airlines adding capacity at the expense of price led to industry-wide operating pressure. The report notes that geopolitical oil prices do not change the long-term logic of aviation; currently at oil price highs + load factor highs + ticket price lows + share price lows, a pullback in oil prices will kick off an upward shift in the profit center and the long-term logic playing out. Attention should be paid to bottom-fishing opportunities. Oil shipping: Iranian attacks combined with high freight rates suppressing demand; the industry expects the boom to be sustainable in the medium term. In September, dark fleet channels opened up and Middle East crude exports basically recovered; STS transfers caused a significant decline in tanker operating efficiency and siphoned off capacity, leading to a supply shortage in the Atlantic China Welding Consumables, Inc. market, and oil shipping freight rates saw an epic surge. Since October, intensified Iranian attacks have affected dark fleet cargo volumes, while ultra-high freight rates in the US Gulf have begun to affect refinery procurement pace; TCE on the Middle East Oman/US Gulf/West Africa routes fell about 20% month on month to US$660,000/550,000/440,000. The industry expects geopolitical conflicts to likely persist, tanker operating efficiency losses to continue, and restocking over the next two years to be a certainty, with the oil shipping boom expected to be sustainable in the medium term and also carrying an option on unexpected upside in compliant demand from Iran sanctions relief. Recently, one-year and three-year time charter rates have risen to US$300,000/day and US$110,000/day, reflecting optimistic medium-term expectations from industry participants, which will secure the dividend appeal of oil shipping companies and support the valuation floor. The report flags another good opportunity to position in oil shipping. Shipbuilding: In October, the inversion between secondhand and newbuild VLCC prices deepened, and the industry generally expects VLCC aging to offset newbuild pressure. Last week, the Ministry of Industry and Information Technology released domestic shipbuilding data for the first three quarters. In the first three quarters of 2026, China's shipbuilding completions, new orders, and order backlog accounted for 63.6%, 81.8%, and 72.4% of the global market share, respectively. Domestic shipbuilding continues to dominate the global market, and global share is expected to rise further. In mid-October, Hengli Heavy Industries signed orders for 12 tankers, including 6 VLCCs at an average price of nearly US$140 million per vessel; it currently holds nearly 70 VLCC orders, ranking first globally. The price of 15-year-old secondhand VLCCs currently exceeds US$160 million, with the inversion versus newbuild prices deepening, reflecting the industry's optimistic expectations for the continued boom in the spot market. The sustained oil shipping boom continues to push up tanker asset prices and shipbuilding demand, while shipyard capacity expansion remains constrained by dock, engine, and staffing availability; the sustainability of the shipbuilding market boom will be significantly better than the previous cycle. The market is concerned about newbuild delivery pressure for VLCC tankers in the coming years, but the industry generally believes that accelerating VLCC aging and the difficulty of the shadow fleet returning to the compliant market will effectively offset newbuild delivery pressure, and tanker supply rigidity will persist. Risk warnings: economic fluctuations, geopolitical oil prices, tariffs, exchange rates, safety incidents, etc.