Guolian Minsheng Securities: The scale of China's leasing fleet is steadily expanding, optimistic about the future development space of the ship leasing industry

According to the Zhitong Finance APP, Guolian Minsheng Securities has released a research report stating that the current ship leasing industry has a rich variety of participants, each with its own characteristics, all of which can capture a certain market share. In recent years, the scale of China's leasing fleet has been increasing its share of the global fleet year by year. As the relevant environmental protection requirements of the IMO are gradually promoted, the requirements for ships will also gradually increase. Coupled with the fact that major global economies are in a rate-cutting cycle, shipowners and cargo companies are more inclined to introduce ships through leasing, providing companies with greater flexibility. Therefore, the firm remains optimistic about the future development prospects of the ship leasing industry.

The main viewpoints of Guolian Minsheng Securities are as follows:

China's ship leasing industry: steady expansion of scale, high proportion of financial leasing

China is a major shipbuilding country, with a ship completion volume of 48.18 million DWT in 2024, accounting for 55.7% of the global share. Benefiting from this, the scale of China's ship leasing has also steadily expanded in recent years. By the end of 2024, the scale of China's leasing merchant fleet will reach 152 million GT, a year-on-year increase of 10.60%. If the orders on hand are taken into account, the scale of China's leasing merchant fleet will reach 171 million GT by the end of 2024, a year-on-year increase of 5.01%. From the perspective of the 2024 increment, of the newly added $22.4 billion in ship leasing assets, $18.5 billion is financial leasing, accounting for 82.59%. The proportion of operating leasing is relatively low, with the average proportion of operating leasing in the newly added ship leasing over the past 10 years only being 26.20%.

The penetration rate of China's ship leasing industry is gradually increasing

Measured by the ratio of the total tonnage of China's leasing fleet to the total tonnage of the global fleet, the penetration rate of China's ship leasing has gradually increased in recent years. By the end of 2024, the total tonnage of China's leased ships will account for 9.47% of the global fleet, an increase of 9.16 percentage points compared to the end of 2010. One of the core factors for the continuous increase in leasing penetration is the rapid progress of domestic leasing companies in green transformation. By the end of 2024, the proportion of energy-efficient ships in the domestic leasing fleet, calculated by number, will be 66%, significantly higher than the global average level of 11.04%. Another core factor is that the average age of ships in China's leasing fleet is relatively low. Against the backdrop of a global fleet age exceeding 17 years, domestic leasing companies' assets with an age of less than 8 years are highly favored.

Industry structure: Bank-affiliated companies occupy a large share

Ship leasing is a typical capital and fund-intensive industry, and it is highly correlated with the industrial cycle. In this regard, bank-affiliated leasing companies occupy a large share of China's ship leasing industry. In terms of the number of ships owned, by the end of 2024, bank-affiliated companies will own a total of 1,953 ships, including existing ships and orders on hand, accounting for 65.47% of the total number of domestic leasing companies' fleets. In terms of total tonnage, by the end of 2024, the total tonnage of bank-affiliated companies' existing ships and orders on hand will reach 125 million GT, accounting for 73.09%. According to the ranking of ship asset value by the end of 2024, seven of the top ten ship leasing companies in China are bank-affiliated, with four of the top five being bank-affiliated.

Main advantages: Bank-affiliated companies have an advantage in funding, while shipyard-affiliated companies have an advantage in assets

From the liability side, bank-affiliated ship leasing companies typically have lower funding costs due to advantages such as shareholder liquidity support, shareholder qualification endorsement, and holding financial leasing licenses. By 2024, the funding costs for Bank of Communications Financial Leasing, China Development Bank Financial Leasing, and COSCO Shipping Financial Leasing are 4.17%, 3.95%, and 4.56%, respectively From the asset side, shipbuilding companies have significant advantages due to their strong industrial background and abundant industrial resources. In 2024, the average yield rates for ship leasing from China Ship Leasing, Bank of Communications Financial Leasing, China National Financial Leasing, and COSCO Shipping Leasing are 11.15%, 7.67%, 12.85%, and 6.57%, respectively. The asset side advantages of shipbuilding leasing companies come from their relatively high proportion of operating leases and their ability to grasp industrial cycles, which helps them make counter-cyclical investments to acquire assets at lower costs, thereby increasing yields.

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