Shipping Sector Sees Broad Strength as Tanker and Bulk Carrier Earnings Surge, Huachuang Securities Reports

China's shipping sector is demonstrating robust performance across multiple segments, with oil tanker and dry bulk carrier earnings showing particularly strong growth, according to a new research report from Huachuang Securities. The firm expressed a comprehensively positive view on investment opportunities in the industry, citing favorable supply-demand dynamics and rising freight rates.

Oil Tanker Profits Hit Record Highs

The oil tanker market has been driven by tight supply and demand, coupled with geopolitical events that have pushed freight rates to historic highs. In the first half of the year, average rates for Very Large Crude Carriers (VLCCs) on the U.S. Gulf and West Africa routes reached $106,000 and $113,000 per day, representing year-over-year increases of 184% and 204%, respectively.

This surge in rates translated directly to record earnings for major operators in the second quarter. According to the report:

• China Merchants Energy Shipping (CMES) saw its Q2 net profit rise 233% year-over-year to ¥4.2 billion.
• COSCO Shipping Energy Transportation (CSET) reported a 104% year-over-year increase in Q2 net profit to ¥2.37 billion.
• China Merchants Nanjing Tanker (CMNT) posted a 33.1% rise in Q2 net profit to ¥380 million.

Huachuang Securities attributed the strong performance to factors including inventory restocking and shifting trade flows, while noting that the scrapping of older vessels is helping to offset the delivery of new ships.

Dry Bulk Market Exceeds Expectations

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The dry bulk shipping segment also experienced a better-than-expected first half, with the Baltic Dry Index (BDI) averaging 2,347 points, an 82% increase from the previous year. The momentum accelerated in the second quarter, with the BDI average climbing 87% year-over-year to 2,751 points.

The firm highlighted a limited supply growth outlook, with the order book for new bulk carriers at approximately 14%, the lowest among the three major shipping sectors. Demand has been supported by increased shipping distances for iron ore, particularly from projects like Guinea's Simandou mine, and strong transport needs for coal, bauxite, and grain.

Container Shipping Rebounds in Q2

After a weak start to the year, the container shipping market strengthened significantly in the second quarter. The average China Containerized Freight Index (CCFI) rose 16.2% year-over-year to 1,350 points in Q2. The report cited rerouting due to geopolitical conflicts, front-loading of shipments ahead of tariff changes, and the start of the peak season as key drivers for the rate increases.

While first-half earnings were mixed for container lines, the second quarter showed a clear improvement. COSCO Shipping Holdings saw its Q2 net profit grow 29% year-over-year to ¥7.54 billion, a marked turnaround from its first-half performance. The report noted that companies with exposure to Middle East and Red Sea routes saw particularly strong results.