Global Shipbuilding: 2027 outlook: should capacity expansion be a concern?

We revisit our proprietary global shipbuilding supply-demand model and raise our shipyards' capacity growth forecast to 8%/9% in 2026/27E (vs. 5%/4% prior) to factor in more confirmed expansion plans mainly in China (e.g. Hengli). We remain bullish on the shipbuilding industry, as we also revise up our new order (demand) forecast by 26%/13% on better-than-expected orders from containership mega-vessels, the continuing tanker super-cycle, and replacement demand of bulkers. We believe replacement of aging fleets will be the key driver of this upcycle, contributing 52% of total new orders during 2026-32E, with global shipyards' orderbooks (and cover years) to remain at an elevated level (>3 years), supporting newbuild prices and prolonging the upcycle until 2032E. We expect Chinese shipyards to increase their share of global new orders from 64% in 2025 to 76%/77% in 2026/27E in CGT terms. We prefer quality capacity expansion leaders at this stage: Songfa is a key Buy (12m PT Rmb300), with