《Back-to-Back Wins》COSCO Shipping Energy (01138) has seen its share price strengthen recently, outperforming the Hong Kong market, reflecting renewed market enthusiasm for the oil shipping sector. This upward trend is not merely driven by news speculation, but rather by the ongoing U.S.-Iran conflict, unresolved risks in the Strait of Hormuz, a sharp rise in Very Large Crude Carrier (VLCC) freight rates, and significant improvement in the company's profitability.
The U.S.-Iran situation has yet to ease, with the United States deploying additional aircraft carrier strike groups and nearly ten thousand troops to the Middle East. Trump has further stated that if a satisfactory agreement cannot be reached, the U.S. may intensify its actions against Iran after the midterm elections. Recently, multiple oil tankers have been attacked in the Strait of Hormuz, significantly increasing shipping risks. Iraq's tanker company has even completed a 2-million-barrel crude oil ship-to-ship transfer outside the Strait of Hormuz using a VLCC for the first time, indicating that traditional shipping routes are being disrupted, voyage distances are lengthening, turnover is slowing, and effective capacity is passively reduced.
The VLCC market has rebounded strongly recently, with 3-year VLCC time charter deals reaching $100,000 per day, and spot market rates on some routes briefly surging to over $1.28 million per day. The Baltic Dirty Tanker Index (BDTI) has risen from around 850 points at the beginning of 2025 to 5,250 points, indicating the oil shipping market has entered an extremely high-boom phase.
In the first half of 2026, COSCO Shipping Energy achieved operating revenue of RMB 15.079 billion (RMB, same below), a year-on-year increase of 30.27%; net profit attributable to shareholders reached RMB 4.556 billion, up 140.58% year-on-year. Foreign trade oil shipping has become the main growth engine, with gross margins significantly improving. As one of the global leaders in VLCCs, the company ranks among the world's largest in terms of fleet capacity, and enjoys extremely high profit elasticity in a high-freight-rate environment.
Second-hand VLCC prices have recently inverted, with 10-year-old VLCCs selling for over $150 million, exceeding the average newbuild cost of approximately $135 million. Buyers are willing to pay a premium essentially to acquire "immediately available capacity." Newbuild deliveries are generally scheduled for 2029 to 2030, and 41% of the global VLCC fleet consists of vessels over 15 years old, making tight compliant capacity supply difficult to alleviate quickly.
JPMorgan points out that under a baseline of $100,000 per day time charter rate in 2027, COSCO Shipping Energy's H-share P/E ratio is about 11x; if the time charter rate rises to $178,000, the P/E ratio would drop to around 6x, indicating clear upside potential in earnings. Compared to extreme freight rate levels, the current valuation has not yet fully reflected the cyclical strength.
However, oil shipping stocks are currently highly volatile. Investors should monitor risks such as a sudden easing of the U.S.-Iran situation, a pullback in freight rates from elevated levels, weakening global crude oil demand, operational disruptions to vessels, and escalation of geopolitical conflicts. COSCO Shipping Energy is a highly cyclical stock with high elasticity, suitable for investors focusing on oil shipping prosperity and geopolitical premiums, but not advisable to chase higher prices based solely on short-term news.
Looking at the stock price performance, it recently rose to a high of HK$20.68 since May. Investors may consider buying around the HK$19 level, with a target of HK$22, and set a stop-loss below the recent low of HK$17.5.
*The author does not hold the aforementioned shares
*Articles published in Economic Times, signed or unsigned, represent the authors' personal opinions and do not reflect the position of Economic Times. Economic Times serves as a platform providing free expression of views.
The U.S.-Iran situation has yet to ease, with the United States deploying additional aircraft carrier strike groups and nearly ten thousand troops to the Middle East. Trump has further stated that if a satisfactory agreement cannot be reached, the U.S. may intensify its actions against Iran after the midterm elections. Recently, multiple oil tankers have been attacked in the Strait of Hormuz, significantly increasing shipping risks. Iraq's tanker company has even completed a 2-million-barrel crude oil ship-to-ship transfer outside the Strait of Hormuz using a VLCC for the first time, indicating that traditional shipping routes are being disrupted, voyage distances are lengthening, turnover is slowing, and effective capacity is passively reduced.
The VLCC market has rebounded strongly recently, with 3-year VLCC time charter deals reaching $100,000 per day, and spot market rates on some routes briefly surging to over $1.28 million per day. The Baltic Dirty Tanker Index (BDTI) has risen from around 850 points at the beginning of 2025 to 5,250 points, indicating the oil shipping market has entered an extremely high-boom phase.
In the first half of 2026, COSCO Shipping Energy achieved operating revenue of RMB 15.079 billion (RMB, same below), a year-on-year increase of 30.27%; net profit attributable to shareholders reached RMB 4.556 billion, up 140.58% year-on-year. Foreign trade oil shipping has become the main growth engine, with gross margins significantly improving. As one of the global leaders in VLCCs, the company ranks among the world's largest in terms of fleet capacity, and enjoys extremely high profit elasticity in a high-freight-rate environment.
Second-hand VLCC prices have recently inverted, with 10-year-old VLCCs selling for over $150 million, exceeding the average newbuild cost of approximately $135 million. Buyers are willing to pay a premium essentially to acquire "immediately available capacity." Newbuild deliveries are generally scheduled for 2029 to 2030, and 41% of the global VLCC fleet consists of vessels over 15 years old, making tight compliant capacity supply difficult to alleviate quickly.
JPMorgan points out that under a baseline of $100,000 per day time charter rate in 2027, COSCO Shipping Energy's H-share P/E ratio is about 11x; if the time charter rate rises to $178,000, the P/E ratio would drop to around 6x, indicating clear upside potential in earnings. Compared to extreme freight rate levels, the current valuation has not yet fully reflected the cyclical strength.
However, oil shipping stocks are currently highly volatile. Investors should monitor risks such as a sudden easing of the U.S.-Iran situation, a pullback in freight rates from elevated levels, weakening global crude oil demand, operational disruptions to vessels, and escalation of geopolitical conflicts. COSCO Shipping Energy is a highly cyclical stock with high elasticity, suitable for investors focusing on oil shipping prosperity and geopolitical premiums, but not advisable to chase higher prices based solely on short-term news.
Looking at the stock price performance, it recently rose to a high of HK$20.68 since May. Investors may consider buying around the HK$19 level, with a target of HK$22, and set a stop-loss below the recent low of HK$17.5.
*The author does not hold the aforementioned shares
*Articles published in Economic Times, signed or unsigned, represent the authors' personal opinions and do not reflect the position of Economic Times. Economic Times serves as a platform providing free expression of views.
