CICC released a research report stating that the oil tanker sector is undervalued, with companies in the sector offering upside elasticity and downside dividend support. The firm recommends focusing on left-side opportunities and is optimistic about peak season elasticity from marginal supply-demand improvements. CICC is bullish on COSCO SHIP ENGY (01138) and China Merchants Energy Shipping (601872.SH), while also watching China Merchants South Oil (601975.SH).

For the container shipping sector, CICC emphasizes the allocation value of high-dividend targets. Private enterprises with high dividend payout ratios such as HMM Haiyang International (01308) and SITC International (603565.SH) have favorable short-term logic (Asian and domestic trade peak season in the second half) and long-term logic (limited small ship supply). COSCO SHIPPING Holdings (01919) provides balance sheet support. For dry bulk, recent freight rates have been strong, with attention on subsequent demand-side improvement catalysts (peak season demand and West Simandou project production), focusing on minor bulk carrier Pacific Basin Shipping (02343).

**Industry Updates**

Weekly freight rate updates: Container shipping US routes rebounded while European routes declined. US West Coast, European, and Southeast Asian routes SCFI rates were up 17.0%/-11.2%/+5.3% week-over-week, domestic trade PDCI index was down 1.01% week-over-week and up 14.77% year-over-year. Oil tanker VLCC was down 8.1% week-over-week and up 91.0% year-over-year, while MR was up 15.6% week-over-week and up 54.8% year-over-year. Dry bulk BDI index was up 7.0% week-over-week, BCI index up 8.2% week-over-week, and BSI index up 4.3% week-over-week.

**Weekly Focus: Tight Supply of Small Container Ships in Asia Region Expected to Continue**

Overall supply of small vessels remains tight, with intra-Asian capacity accounting for approximately 42%. New capacity additions over the past two years have mainly been used for Red Sea diversion feeder services, with limited new supply additions within the Asia region. According to Clarksons, annual new supply of small container ships over the next three years will only be 1-2%, while vessels over 25 years old currently account for 11.2% of the fleet.

Although CICC has recently observed some shipowners beginning to increase small vessel orders, most new ships will not be delivered until 2028 and beyond, having limited impact on small ship capacity over the next three years.

According to Alphaliner data, as of August 2025, sub-3,000TEU small ship capacity is mainly distributed in intra-Asia, Middle East/Indian subcontinent, and intra-Europe regions, accounting for 42%, 15%, and 14% respectively. Compared to end-2023 (before Red Sea diversions), sub-3,000TEU small ship capacity increased 8.5%, with new capacity mainly deployed on Middle East and Indian subcontinent, and intra-Europe routes for Red Sea diversion feeder services, while intra-Asia small ship capacity only grew 2.2%.

**Asia Regional Capacity Mainly Concentrated Among Larger Global Liner Companies with Average Capacity Above 3,000TEU and High Charter Ratios**

According to Haifeng Brokers data, as of end-June 2025, the top ten liner companies in the intra-Asia region held approximately 70% capacity share. Except for HMM Haiyang International (4.1% capacity share, ranked ninth), all are globally operating liner companies deploying larger vessels in the Asia region with individual ship capacity above 3,000TEU and high charter ratios.

CICC believes that globally operating liner companies' intra-Asia capacity is mainly used for mainline feeder services, creating differentiated competition with HMM Haiyang International, which focuses on intra-Asia network route deployment primarily using small vessel capacity.

**Risks**

Geopolitical changes and significant decline in global economic growth.