The global shipbuilding leader, China State Shipbuilding Corporation Limited (CSSC), has reported a remarkable performance for the first half of the year.

On the evening of July 13th, CSSC announced that it expects its net profit attributable to the parent company's shareholders for the first half of 2026 to be between 9.2 billion and 11 billion yuan. This represents a staggering year-on-year increase of 143.56% to 191.21% compared to the same period last year, based on a restated basis following a merger.

Since 2021, China's shipbuilding industry has maintained a high level of prosperity, enjoying the dual benefits of rising volumes and prices.

In the first quarter of 2026, Chinese shipyards secured new orders for 12.39 million compensated gross tons, a massive 91% increase year-on-year, capturing 71% of the global market share, far exceeding South Korea's 20%. The order backlog reached 120 million compensated gross tons, up 19% year-on-year, and has maintained double-digit growth since 2021.

In terms of pricing, as of the end of May, China's Newbuilding Price Index stood at 1131 points, essentially level with the decade-high seen in the fourth quarter of 2024 and representing an increase of over 45% from the cyclical low at the end of 2020. Prices for oil tankers, container ships, and bulk carriers have all maintained an upward trend.

In the past, high freight rates in the shipping market would boost shipowner profits, which then translated into higher ship prices for builders. However, the core drivers of the current demand cycle extend beyond traditional market dynamics, now being reinforced by two long-term structural factors: fleet renewal and geopolitics.

Fleet Renewal Drives Demand

Firstly, the global fleet is entering a concentrated replacement window due to aging. By the end of 2025, ships over 15 years old accounted for as much as 45% of the fleet, while those under 10 years old comprised only 30%. Measured by deadweight tonnage, the average age of the global fleet is 13.3 years, up 2.5% year-on-year, compared to just around ten years in 2013.

The previous peak in ship deliveries occurred between 2007 and 2012, corresponding to a 20-25 year lifespan. It is foreseeable that the proportion of older vessels and the average fleet age may continue to rise in the coming years.

Environmental Regulations Accelerate Change

Secondly, increasingly stringent environmental regulations are accelerating the phasing out of older ships. The International Maritime Organization (IMO) established new regulations in 2023, requiring a 20% reduction in greenhouse gas emissions from international shipping by 2030 compared to 2008, at least a 70% reduction by 2040, and achieving net-zero emissions by 2050.

As the IMO's emission reduction framework progresses, with regulations like the EU ETS already implemented and FuelEU Maritime enacted, the operational costs of high-emission, older vessels are increasing further.

Compliance has shifted from an option to a necessity for survival, forcing shipowners to retire older vessels that cannot meet the new rules ahead of schedule and turn to ordering new ships powered by low- or zero-carbon fuels. The fact that 46% of global new orders in 2025 were for vessels using alternative energy sources is the most direct evidence of this trend.

Consequently, several securities firms and institutions anticipate that replacement demand for older vessels will account for more than half of total order demand over the next five years.

Capacity Constraints Support Pricing

Currently, the expansion of global shipbuilding capacity faces structural bottlenecks. As the global shipbuilding center, China, leveraging its complete supply chain and cost advantages, has seen some capacity growth and has captured the majority of global orders. However, this expansion is also constrained by operational barriers such as environmental regulations, land availability, and the near-exhaustion of high-quality deep-water coastline resources.

Meanwhile, Japan, South Korea, and Europe, having undergone successive rounds of brutal capacity rationalization, face issues like labor shortages and high manufacturing costs, and largely lack both the capability and the willingness to restart and expand capacity.

It is evident that the current shipbuilding upcycle is a structured one, characterized by ample orders, long-term production schedules, and firm pricing. Leading shipyards generally have order backlogs covering more than four years, indicating a more solid foundation of high prosperity compared to previous cycles.

China's Strategic Advantages

Currently, China's shipbuilding industry benefits not only from the sector's high prosperity but also from its grasp of the shifting global industrial landscape and its internal cost control advantages.

Since the current cycle began in 2021, the center of gravity in global shipbuilding has accelerated its shift towards Asia, and particularly towards China.

In 2025, China's shipbuilding industry accounted for 69% of global new orders and a commanding 66.8% of the global order backlog. The market share of traditional shipbuilding powers like Europe has shrunk to single digits. In this "East rises, West declines" dynamic, the vast majority of new global shipbuilding demand is set to become incremental business for Chinese shipyards.

While capturing global orders, Chinese shipbuilders have also strengthened their cost control capabilities. Beyond economies of scale, the cost advantage stems from two main areas.

First is the adoption of integrated modular construction. The traditional sequential shipbuilding model required building the hull first before fitting it out. Now, the promotion of parallel hull, outfitting, and painting operations can double dock productivity, shorten the dock period by two-thirds, and reduce overall ship construction costs by approximately one-tenth.

Second is the significant price spread between ship prices and steel prices. Steel is the primary raw material for shipbuilding, accounting for about 70% of total raw material costs. Influenced by supply-demand dynamics, prices for shipbuilding-grade medium and heavy plates have continued to decline, with current prices nearly halved from their 2021 peak, reaching multi-year lows. The drop in raw material costs directly boosts shipyard profit margins.

Industry Consolidation and Competitive Landscape

Naturally, China's shipbuilding industry has undergone a series of integrations and mergers, resulting in a clear oligopolistic structure, with the market share of small and medium-sized shipyards being continuously squeezed.

In 2020, CSSC injected assets including Jiangnan Shipyard and Guangzhou Shipyard International. Then, in 2025, it absorbed and merged China Shipbuilding Industry Corporation, integrating shipbuilding assets from Dalian, Wuchang, Beihai, and others to become the world's largest shipbuilding group, with a global market share approaching 20%.

Songfa Co., Ltd. integrated Hengli Heavy Industries. In 2022, Hengli Heavy Industries spent 2.1 billion yuan to acquire the long-idled STX (Dalian) assets, planning a 18 billion yuan investment for revitalization, and successfully delivered its first newly built ship in 2024.

By 2025, Songfa Co., Ltd.'s new order intake ranked second in China and second globally, second only to CSSC, making it the fastest-growing shipbuilder during this cycle.

Beyond these, other significant domestic shipbuilders include Yangzijiang Shipbuilding, COSCO Shipping Heavy Industry, New Times Shipbuilding, and Fujian Shipbuilding Heavy Industry. However, their market shares are considerably lower than those of CSSC and Songfa Co., Ltd., indicating an increasingly pronounced trend of the strong getting stronger.

Comparing Profitability and Strategies

Comparing profitability, Yangzijiang Shipbuilding achieved a remarkably high net profit margin of over 30% in 2025, far exceeding Songfa Co., Ltd.'s 12.3% and CSSC's 7%. The primary reason lies in its order focus on clean energy vessels. These ship types have high technological barriers, and their unit prices and profit margins are significantly higher than those of traditional bulk carriers and oil tankers.

As the global leader, CSSC has the largest business scale but a relatively lower profit margin. Currently, impairments from the previous cycle's trough have largely been accounted for. The proportion of high-priced orders is expected to increase going forward, leading to a recovery in profit margins. Furthermore, there is potential for the injection of high-quality group assets like Hudong-Zhonghua Shipbuilding.

As a rising star in shipbuilding, Songfa Co., Ltd. has undoubtedly timed this cycle perfectly, expanding very aggressively with the fastest earnings growth. Its future growth prospects remain significant for two reasons: first, its order delivery structure is shifting from bulk carriers to a focus on cruise ships and container ships, increasing the proportion of high-value-added vessel types; second, it continues to plan for expansion through new investments.

In summary, CSSC, as the established national champion, operates more steadily, with its performance continuing to recover alongside the prosperous cycle. Songfa Co., Ltd., as the "first privately-owned shipbuilding stock," carries no historical burdens and offers superior growth potential. Meanwhile, Yangzijiang Shipbuilding has adopted a differentiated competitive strategy.

In conclusion, China's shipbuilding industry is in a structured upcycle characterized by rising volumes and prices, driven by the eastward shift of the global industry and internal consolidation, fostering an oligopolistic landscape. However, the three major leaders exhibit significant differences in their order books, cost structures, and technological focuses.