Nanjing Shenghang Shipping Co.,Ltd. (001205) recently addressed investor inquiries on its investor relations platform, shedding light on current market dynamics. In response to a question about freight rates and capacity during July and August, the company's board secretary explained that shipping rates are influenced by a complex mix of factors; these include the macroeconomic environment, the supply-demand landscape of the petrochemical industry, vessel supply, fuel and labor costs, and geopolitical conditions. Rates also vary considerably across different routes, cargo types, ship models, and operational modes.
Regarding recent market conditions, the company highlighted a divergence between domestic and international segments. In the domestic market, Nanjing Shenghang Shipping Co.,Ltd. primarily operates under annual contracts of affreightment (COA) and time charter agreements with major clients, ensuring stable rates. However, spot market rates have seen a modest uptick on certain routes due to typhoon disruptions and fuel price increases. In the foreign trade market, rates are trending upward in some regions, influenced by geopolitical factors, fuel price volatility, and typhoon weather. Nevertheless, the company acknowledged that rising fuel costs are exerting pressure on its cost side.
Addressing the challenge of capacity expansion without corresponding profit growth, the board secretary outlined the company's strategic response. Facing a complex environment in both domestic and international water transport, the board and management are leveraging their professional advantages in the hazardous chemicals niche. This involves deepening relationships with core clients to secure a stable business base, actively developing new customer resources at home and abroad, and flexibly reallocating capacity between domestic and foreign trade. By optimizing the fleet structure and route layout, the company aims to enhance overall resource efficiency and business resilience. Simultaneously, Nanjing Shenghang Shipping Co.,Ltd. is committed to refined management, controlling costs, and ensuring the continuity and stability of its fleet operations.
Clarifying its fleet status, a key point of inquiry, the company confirmed that it and its subsidiaries currently operate a fleet of 54 vessels, with a total capacity of 422,300 deadweight tons (DWT). Additionally, there are 11 vessels under construction, which includes six 13,500 DWT stainless steel chemical/product tankers that have contracts signed but have not yet commenced construction. These newbuilds represent a total capacity of 126,700 DWT. This statement follows an earlier half-year report mentioning 5 vessels under construction and a recent contract for 6 more, with media reports suggesting a total of 65 vessels including contracts.
Furthermore, investors questioned the company's purpose in going public, suggesting goals like expanding financing channels, raising brand awareness, incentivizing employees, and enhancing corporate governance. The board secretary reaffirmed the company's focus on its core business and its commitment to improving overall quality as a listed entity, enhancing information disclosure, strengthening investor relations, and increasing shareholder returns. The ultimate goal is to foster the growth of the company's intrinsic value and its competitive edge.
Finally, in response to suggestions about fleet optimization and employee incentives, the company addressed both topics. On fleet renewal, the management emphasized a strategy focused on strengthening its core business and its service capabilities in the hazardous chemicals transport sector, adding that any matters requiring disclosure would be handled in compliance with regulations. Regarding employee motivation, Nanjing Shenghang Shipping Co.,Ltd. stated it values employee rights and continuously works to improve its long-term incentive mechanisms. This includes using a mix of compensation and equity incentives to attract and retain talent, noting that it already implemented an equity incentive plan in 2021. Future plans would also be disclosed as required by law.