Summary of Key Points from the Shipping Geopolitics Playbook: Winter 2025 Edition Industry Overview - **Industry**: Shipping - **Key Geopolitical Dynamics**: Gaza cease-fire, Russia-Ukraine war, US-China trade tensions, IMO decarbonization [1][11] Core Insights and Arguments Gaza Cease-fire and Red Sea Rerouting - The potential end of Red Sea rerouting is a significant concern for container shipping, having reduced effective capacity by approximately 10% [2][15] - Oversupply has negatively impacted profitability in the container shipping segment since Q4 2024, but a return to the Suez Canal could lead to a sharp recovery in earnings [2][17] Russia-Ukraine War - Increased restrictions on Russian oil exports or a peace deal could positively impact crude tankers, driving demand for legitimate tankers and supporting a multi-year up-cycle [3][41] - The VLCC (Very Large Crude Carrier) market has seen a rally due to tighter sanctions on Russian oil, with spot market prices reaching multi-year highs [40][42] US-China Trade Tensions - The shift in global supply chains away from China due to near-shoring initiatives may benefit dry bulk shipping, while container shipping faces long-term demand risks [4][62] - A recent truce between the US and China has temporarily reduced trade barriers, but long-term risks remain due to ongoing geopolitical tensions [64][68] IMO Decarbonization - Slower vessel speeds may reduce effective supply, necessitating a recalibration of traditional supply/demand forecasts [5][5] - Compliance costs and capital expenditures are expected to rise, with varying impacts across shipping segments [5][5] Segment Preferences - **Preferred Segments**: VLCC tanker shipping is favored due to a rational supply side and increased demand for legitimate vessels [6][14] - **Least Preferred Segment**: Container shipping is viewed negatively due to potential oversupply and geopolitical risks [6][14] Stock Ratings - **Overweight (OW)**: CSE-H, CMES - **Equal Weight (EW)**: CSE-A, Pacific Basin - **Underweight (UW)**: Maersk, CSH-H/A, OOIL, NYK, MOL, K-Line [10][14] Additional Important Insights - The container shipping order book represents 32% of the total fleet, with a significant increase in new orders since 2020, leading to an effective supply growth forecast of 8.3% in 2025 [28][29] - The geopolitical dynamics are reshaping investor expectations regarding global trade flows, with shipping being a critical component of global trade [11][12] - The ongoing geopolitical events have caused unexpected disruptions in shipping cycles, diverging from traditional supply and demand forecasts [11][12] Conclusion - The shipping industry is currently navigating complex geopolitical landscapes that significantly impact various segments. The potential end of rerouting in the Red Sea, ongoing tensions between the US and China, and the implications of the Russia-Ukraine conflict are critical factors influencing market dynamics and investment strategies in the shipping sector.

Summary of Asia Shipping Ecosystems Conference Call Industry Overview - The conference call focused on the Asia shipping industry, particularly the outlook for 2026 and the current dynamics affecting the sector [2][7][8]. Key Insights Demand Trends - Demand trends are highly bifurcated: - Asia-Europe and intra-region trade are resilient. - US routes are lagging, with container imports down approximately 7% year-over-year (Y/Y) [2][7]. - Europe has seen an 11% increase in trade, while the rest of the world is up 8% [2][7]. - Global trade excluding North America has grown around 6%, which is double the normal rate [2][7]. Supply Dynamics - Vessel delivery schedules and evolving emissions standards are critical factors shaping the market: - Global demand has increased by approximately 7-8% since Q4 2023, while global capacity has grown by about 11-12% [7]. - Anticipated large vessel deliveries in 2027/28 could lead to a cyclical downturn, reminiscent of 2015-16, but not as severe as the 2008 crash [7]. - Only 13% of the fleet is up for scrapping, indicating muted scrapping activity [7]. Trade Policy and Geopolitical Factors - Trade policy remains uncertain, particularly regarding the USTR 301 tariff issue, which is politically driven and likely to resurface [7][8]. - The Red Sea passage is a significant variable, with carriers expected to act cautiously due to geopolitical developments [9]. Intra-Region Trade - Intra-region trade is a bright spot, driven by supply chain realignment and India's emergence as a major market [7][8]. - Infrastructure gaps in India, particularly in port capacity, are creating demand for smaller feeder vessels [7]. Shipping Alliances - Ongoing reshuffles in shipping alliances are influencing competitive dynamics: - Financial strength allows carriers to manage capacity without engaging in price wars [8]. - Major carriers like Maersk and Hapag-Lloyd have seen volume growth, but rate declines are attributed to individual strategies rather than alliance structures [8]. Stock Ratings and Recommendations - Overweight ratings are maintained for: - TS Lines (intra-region) - COSCO - OOIL - Evergreen Marine - Mitsui OSK - An Underweight rating is retained for YZJ Shipbuilding, as the shipbuilding cycle has peaked [2][7]. Financial Metrics - The report includes financial metrics for various shipping companies, highlighting potential upside and market capitalization [10][11][12]. Conclusion - The Asia shipping sector is navigating a complex landscape with mixed opportunities and risks. Resilience and adaptability will be key themes for 2026 and beyond, with intra-region trade and supply chain realignment presenting potential growth areas [2][7].

Summary of Container Shipping & Shipbuilding Insights Industry Overview - The container shipping and shipbuilding sectors are experiencing increased confusion regarding demand dynamics, with mixed signals about whether demand is strong or weak, pent-up or front-loaded [2][6][8] - Maersk has reported robust demand outside the US, while the US market remains cautious due to tariff uncertainties [2][20] - ICTSI has observed no evidence of cargo front-loading at its ports, complicating the understanding of demand patterns [2][6] Key Companies and Financial Outlook Maersk - Maersk raised its guidance due to strong demand outside North America, expecting global container market volume growth of 2-4% [20][31] - Financial guidance was increased by 17% at the mid-point, with EBITDA raised to US$8-9.5 billion and EBIT raised to US$2-3.5 billion [20][31] ONE - ONE cut its FY25 outlook due to reliance on volatile US routes, lowering EBITDA to US$2.6 billion from US$2.9 billion [21][33] COSCO - COSCO's 1H25 net profit is expected at RMB 18.8 billion, an 11% increase year-over-year [6][38] - Price targets for COSCO have been raised to HKD 21 for COSCO-H and RMB 24 for COSCO-A [6][38] OOIL - OOIL reported a 4.4% year-over-year increase in overall lifting volume for 1H25, with a net profit preview of USD 840 million, up 1% year-over-year [39] Evergreen Marine - Evergreen Marine's 1H25 net profit is expected to see a 2% year-over-year increase, with a price target raised to TWD 352 [6][40] Demand Dynamics - Global container demand grew by 2.6% year-over-year in June, supported by strong Asia-Europe trades [6][8] - Chinese exports in July 2025 rose 7.2% year-over-year, driven by manufacturers rushing to meet tariff deadlines [22][23] Geopolitical and Economic Factors - The Red Sea crisis continues to absorb industry capacity, impacting shipping routes and contributing to port congestion [14][15][28] - USTR 301 tariffs are influencing industry strategies, with Maersk indicating it will not charge customers fees related to these tariffs [16][20] Inventory Levels and Market Sentiment - The US inventory-to-sales ratio indicates increased inventory levels due to pre-stocking activities, with the Logistics Managers' Index (LMI) showing a decline in inventory levels [12][13] - The US market is adopting a "wait-and-see" approach due to tariff uncertainties, which may lead to a spike in demand as tariff deadlines approach [9][10] Challenges and Opportunities - Port congestion remains a significant challenge, particularly in Europe, due to underinvestment in capacity [14][27] - The ongoing geopolitical uncertainties present both risks and opportunities for investment in shipping stocks with strong exposure to non-US markets [23][30] Conclusion - The container shipping and shipbuilding sectors are navigating a complex landscape characterized by mixed demand signals, geopolitical uncertainties, and evolving market dynamics. Companies like Maersk, COSCO, OOIL, and Evergreen Marine are adapting their strategies to leverage opportunities while managing risks associated with tariffs and global trade disruptions.

Investment Rating - The report maintains a cautious outlook on container shipping, downgrading the sector due to structural headwinds and demand uncertainty beyond August [9][10]. Core Insights - The report highlights that US tariffs have limited direct impact on the bulk and tanker markets, while the Baltic Dry Index (BDI) increased by 2% week-on-week, driven by higher Panamax earnings [9][10]. - The report suggests a buy rating for Maersk, a hold for SITC, and a reduction for several other companies in the container shipping sector, indicating a selective investment approach [9][10]. Summary by Sections US Tariff Updates - The Trump administration delayed the 10% baseline tariff and set various tariffs for key trading partners, with significant implications for trade dynamics [2]. - Tariffs on copper and other commodities are set to take effect, which may influence demand in the bulk market [4][53]. Container Shipping Trends - The Shanghai Containerized Freight Index (SCFI) dropped 1.7% week-on-week, marking the fifth consecutive week of decline, although rates to the US showed some recovery [33][34]. - The report notes that while front-loading may temporarily boost cargo flows, significant demand uncertainty looms due to potential tariff impacts [3][9]. Baltic Dry Index and Dry Bulk Market - The BDI rose 2% week-on-week, with Panamax rates increasing by 14% due to strong demand in the Atlantic basin, while Capesize rates fell by 12% due to weak iron ore demand [52][58]. - The report anticipates a 3% growth in the dry bulk fleet but expects flattish demand, leading to a softening of freight rates in the coming years [58]. Freight Rates and Market Dynamics - Container shipping freight rates have shown variability, with the SCFI composite index reflecting a significant year-on-year decline of 43.3% [50]. - The report indicates that bunker prices and time charter rates are also trending, with specific rates for different vessel types being monitored closely [50][57].

Summary of the Conference Call on Global Shipping & Oil Industry Overview - The call focuses on the **global shipping and oil industry**, particularly the implications of recent **Middle East tensions** on oil markets and global supply chains [1][2][3]. Core Insights and Arguments - **Geopolitical Risk**: The recent flare-up in the **Strait of Hormuz** led to increased energy volatility and discussions around tanker operations. However, the geopolitical risk premium has partially unwound following a ceasefire agreement between the US and Iran [2][3]. - **Long-term Risks**: Despite the current calm, underlying risks in the Middle East remain, including strategic implications for Israel and uncertainties in the Red Sea, which could affect global trade routes [3]. - **Investor Sentiment**: Investors are questioning whether the recent tensions are truly resolved or if they represent a new normal, indicating a need for careful positioning in the market [3]. - **Shipping Companies Analysis**: The call will analyze how elevated risks around key maritime routes are impacting routing, insurance costs, and overall sentiment towards major shipping companies such as **China Cosco, Hapag-Lloyd, Maersk, K-Line, MOL, NYK, OOIL, and ZIM** [3]. - **Energy Sector Impact**: Discussion will also cover how the risk reset affects global oil majors and companies heavily leveraged in the energy sector, focusing on supply shock risks and demand-side resilience [3]. Additional Important Points - **Market Framework**: The session will outline the current oil market framework and assess how much geopolitical risk is already priced in, which is crucial for understanding tanker rates and rerouting risks [2][3]. - **Volatility in Spot Rates**: Spot rates are experiencing volatility, driven by geopolitical headlines, necessitating a discussion on which companies are better positioned based on fleet, regional mix, or contract structure [3]. - **Investment Flows**: The dynamic between supply shock risks and demand resilience may shift expectations for refining margins, fuel costs, and investment flows into energy infrastructure [3]. Conclusion - The call aims to provide a comprehensive understanding of the complex macro shocks affecting the shipping and energy sectors, helping clients navigate potential investment opportunities and risks in the current landscape [3].