China Merchants Energy Shipping (601872.SS): NDR Takeaways – Management Bullish on VLCC; Cross-Regional Arbitrage Demand
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Goldman Sachs hosted a non-deal roadshow with China Merchants Energy Shipping (601872.SS) on March 27, 2026. Management expressed strong optimism regarding the Very Large Crude Carrier outlook, viewing the current one-year VLCC time charter equivalent rate of approximately $130,000 per day as a solid support level, with further upside potential if the Strait of Hormuz reopens. Even if the strait remains closed, cross-regional oil price differentials are expected to drive arbitrage demand, effectively creating additional shipping ton-mile requirements. The company's fourth-quarter 2025 VLCC TCE averaged around $80,000 per day, outperforming the broader market due to its higher spot exposure. Management noted a one to one-and-a-half-month lag between spot freight rates and revenue recognition, estimating that every $10,000 per day increase in TCE translates into a RMB 1 billion pre-tax profit uplift. The global VLCC supply remains constrained, with low utilization rates among vessels aged over 20 years. Many of these older vessels are being utilized for floating storage. Furthermore, current orderbook deliveries amount to only half the volume of the aging fleet, tightening overall supply dynamics. Temporary sanctions exemptions on Russia and Iran should modestly boost demand for compliant fleets, as shadow fleet vessels remain restricted from numerous global ports.