J.P. Morgan sees shipping’s cycle extending as bottlenecks and new demand engines outweigh vessel-orderbook concerns.

Overview

J.P. Morgan presents a cross-sector Asia-Pacific and global shipping ecosystem view. Its central conclusion is that the cycle is being prolonged less by headline demand than by structural limits on effective capacity: port and inland-logistics bottlenecks, longer trade routes, climate disruptions, geopolitical risk and increasingly fragmented supply chains.

Core views

J.P. Morgan’s central argument is that concern about vessel overordering is too narrowly focused on container shipping. Although the container orderbook-to-fleet ratio is above 30%, the institution argues that vessels cannot be evaluated independently of the port, yard, inland-logistics and first-/last-mile systems needed to absorb them. Global port capacity has expanded much more slowly than vessel ordering over the past five to six years, and J.P. Morgan expects that mismatch to remain relevant for the next three to five years. Recurring congestion—including roughly 12-day vessel waits in Shanghai as well as pressure in Singapore, Manila and Jakarta—keeps effective supply tight and supports operating cash flow and margins for well-positioned operators. Supply-chain fragmentation is a second structural driver. Regionalization, changes in US trade policy and geopolitical uncertainty are creating more transshipment, duplication and intra-regional cargo movement, raising demand for smaller vessels and local port and logistics infrastructure. J.P. Morgan cites SCFI growth of 162% year-on-year and more than 120% year-to-date as evidence that freight can stay strong despite a high headline orderbook. The drying Panama Canal is identified as a near-term variable: a drought season expected in about one month could add tightness in 3Q–4Q and potentially into the following year. The report sees diversified Japanese shippers as beneficiaries because their earnings are exposed not only to containers but also to dry bulk, tankers and car carriers. It expects NYK, MOL and K-Line to raise full-year profit guidance by 5–10% around the July–September reporting window, potentially above consensus. MOL is the preferred name because its contract-based business combines earnings stability with market-rate upside; K-Line is next, with potential additional buybacks and growth investment in its forthcoming medium-term plan; NYK follows. Higher tanker and container rates, capital-efficiency initiatives and shareholder returns are central to this view. For dry bulk, the report emphasizes distance rather than headline trade growth. The Baltic Dry Index is up 62% year-on-year while dry-bulk trade is expected to rise only about 3%; grain flows from the Americas to Asia are averaging around 8,000 miles versus a typical 5,500 miles. El Niño, Middle East conflict, Panama restrictions and stronger coal demand are cited as factors that keep vessels occupied longer. J.P. Morgan expects freight to strengthen into 4Q and the first half of the following year. Tankers show the same ton-mile mechanism more acutely: Middle East Gulf-to-China VLCC earnings exceeded US$1 million per day, Oman-to-China was around US$640,000 per day and US Gulf-to-China around US$290,000 per day. The report remains positive on COSCO Shipping Energy, arguing that geopolitical uncertainty, alternative routing and potentially China’s refined-product export policy can sustain the risk premium. Ports are characterized as the most durable expression of the thesis because their pricing power rests on scarcity and logistics complexity rather than freight cyclicality alone. Emerging-market and gateway ports should benefit from persistent congestion, reshoring and supply-chain realignment. ICTSI’s portfolio spans 95% of its operations globally, which J.P. Morgan views as defensive across trade cycles. CMPH reported high-single-digit net-profit growth in 1H26, robust operating cash flow, a stable payout policy of at least 45% for FY26, and a focus on disciplined M&A and overseas expansion including a pending Brazil transaction. The report argues that such operators can capture not only volumes but also higher tariffs and value-added revenue. In Korean shipbuilding and marine engines, J.P. Morgan sees optionality beyond the commercial newbuild cycle. It reiterates Overweight on HD Hyundai Heavy and Hanwha Ocean, whose 2Q commercial-shipbuilding operating-profit margins were 17% and 23%, respectively, with visibility through at least 2029. AI data-center engine demand is expected to support 2028–2030 and later earnings: HD Hyundai Heavy’s planned 4 GW engine-capacity addition could lift engine sales to about W10 trillion by 2030 from about W4 trillion in 2025. Naval and defense demand adds another pool, with the US Navy’s FY2027–2031 plan covering 75 vessels worth about US$268 billion and encouraging allied foreign construction. J.P. Morgan considers Hanwha Ocean especially positioned for US and ASEAN naval orders, citing recent Thailand wins and bids in Saudi Arabia, Egypt and Peru. Hanwha Engine and Hyundai Marine Solution are highlighted for above-industry earnings growth, diversified orderbooks and seller’s-market conditions. China shipbuilding is supported by orderbooks: leading yards are full through 2029 and many large slots through 2030. Songfa is the top pick, based on yard and engine expansion and margin quality; CSSC offers margin visibility and yard upgrades, while Yangzijiang is characterized as more defensive. J.P. Morgan argues demand is broad across tankers, bulkers, gas carriers and container ships, reinforced by environmental standards and replacement demand rather than one vessel category. The key longer-term issue, however, is whether expanded yard capacity will have enough orders after 2029.

Analysis framework

The report compares physical capacity constraints with headline vessel supply, then traces how congestion, rerouting and trade fragmentation affect effective ship availability, freight rates and operator cash flow. It applies this framework across containers, dry bulk, tankers, ports, shipbuilding and engines, using operating margins, route earnings, orderbook data, capacity additions and peer valuation tables to identify preferred beneficiaries.

Methodology notes

• Industry AnalysisSupply-demand framework

  Effective shipping-supply analysis

  The report contrasts vessel ordering with slower port and logistics expansion, arguing that usable capacity remains constrained despite a large container orderbook.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Shipping ecosystem transmission

  It links port congestion and supply-chain fragmentation to vessel utilization, freight rates, port tariffs, operating cash flow and the earnings of carriers, ports and shipbuilders.

• Industry AnalysisVolume-price decomposition

  Ton-mile and freight-rate analysis

  For bulk and tanker shipping, the report distinguishes modest cargo-volume growth from longer voyage distances and higher vessel occupancy, which it identifies as the mechanism supporting rates.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Mitsui O.S.K. Lines (9104)

  J.P. Morgan’s top Japanese shipping preference, supported by contract-based earnings stability and market-rate upside.

  Strengths

  Diversified business model, contract-based operations and potential earnings upgrades.

  Comparison

  Ranked ahead of K-Line and NYK in J.P. Morgan’s Japanese shipping pecking order.

  Risks

  Exposure to freight-rate and trade-flow conditions.

• Kawasaki Kisen (9107)

  Preferred Japanese shipper following MOL.

  Strengths

  Potential earnings upgrades, diversified exposure and possible shareholder-return actions.

  Comparison

  Ranked behind MOL and ahead of NYK.

  Risks

  Dependence on freight rates and the forthcoming medium-term plan.

• HD Hyundai Heavy Industries (329180.KS)

  Overweight Korean shipbuilder and engine beneficiary.

  Strengths

  17% 2Q commercial shipbuilding operating-profit margin, AI data-center engine capacity expansion and naval optionality.

  Comparison

  Alongside Hanwha Ocean, has earnings and margin visibility through at least 2029.

  Risks

  Execution of engine-capacity expansion and realization of AI and naval orders.

• Hanwha Ocean (042660.KS)

  Overweight Korean shipbuilder with naval and defense optionality.

  Strengths

  23% 2Q commercial shipbuilding operating-profit margin and positioning for US and ASEAN naval orders.

  Comparison

  J.P. Morgan sees it as especially positioned for US and ASEAN naval opportunities.

  Risks

  Dependence on order conversion and geopolitical demand conditions.

• Guangdong Songfa (603268.SS)

  J.P. Morgan’s top China shipbuilding pick.

  Strengths

  Aggressive yard and engine expansion, strong margin profile and extended shipyard order visibility.

  Comparison

  Preferred over CSSC and Yangzijiang.

  Risks

  Whether expanded capacity can remain occupied after 2029.

• China Merchants Port Holdings (00144.HK)

  Port beneficiary of congestion, supply-chain realignment and emerging-market expansion.

  Strengths

  High-single-digit 1H26 net-profit growth, robust operating cash flow and FY26 payout ratio of at least 45%.

  Comparison

  Part of J.P. Morgan’s selected port beneficiaries alongside ICTSI and others.

  Risks

  Execution of overseas expansion and the pending Brazil transaction.

Key data

• Container orderbook-to-fleet ratioc.30%+High headline supply indicator, but J.P. Morgan argues that port and logistics capacity is the binding constraint.
• Shanghai vessel waiting timec.12 daysEvidence of recurring port congestion.
• SCFI+162% Y/Y; more than +120% YTDCited as evidence of resilient container-freight pricing amid supply-chain fragmentation.
• HD Hyundai Heavy / Hanwha Ocean 2Q commercial shipbuilding operating-profit margin17% / 23%Both are described as well above historical averages.
• HD Hyundai Heavy engine sales potentialc.W10T by 2030 versus c.W4T in 2025Based on a planned 4 GW engine-capacity addition and AI data-center demand.
• US Navy FY2027–2031 plan75 vessels; c.US$268BPotential naval and defense demand pool for allied builders.
• Baltic Dry Index+62% Y/YCompared with expected dry-bulk trade growth of only c.3%.
• Middle East Gulf-to-China VLCC earningsmore than US$1MM/dayAround 20 times last year’s level, according to the report.

Impact & implications

J.P. Morgan believes the most advantaged companies are those able to monetize scarce logistics capacity, longer routes and diversified demand pools. Its preferences favor diversified Japanese shippers, selected emerging-market ports, Korean builders and engine suppliers with AI and defense exposure, and Chinese yards with extended order visibility.

Risks

• The report identifies a longer-term risk that expanded Chinese shipyard capacity may lack sufficient orders after 2029.
• Shipping earnings remain exposed to the persistence of geopolitical uncertainty, alternative routing and freight-market conditions.

What to watch

• Panama Canal water conditions and the approaching drought season, which could tighten shipping capacity in 3Q–4Q and beyond.
• Japanese shippers’ July–September earnings reports and potential 5–10% full-year guidance upgrades.
• AI data-center engine inquiries, HD Hyundai Heavy’s capacity build-out and naval-order conversion for Korean shipbuilders.
• Whether Chinese shipyards can add output and sustain order coverage after 2029.