According to a research report from China Galaxy Securities Co., Ltd. (HKG: 6881), South Korea has established a US-Korea shipbuilding cooperation investment consultation body, which is expected to accelerate Korean shipbuilders' investments in the United States. Concurrently, market interest in Floating Data Centers (FDC) is heating up, with South Korea's three major shipyards having received customer inquiries, and FDC profits are projected to exceed those of the currently most profitable LNG carriers. Furthermore, Canada's Canadian Patrol Submarine Project (CPSP) has a total scale of 60 trillion won; a successful bid by the Korean side would significantly boost shipbuilder profits. With the global shipbuilding cycle in an upward trend, attention is drawn to the accelerated earnings release of Chinese shipbuilding companies. The main views of China Galaxy Securities are as follows:
Establishment of Consultation Body to Accelerate US Shipbuilding Investment
On June 25th, several major Korean financial institutions, including the US-Korea Strategic Investment Company, Korea Export-Import Bank, Korea Development Bank, Korea Trade Insurance Corporation, and Korea Ocean Business Corporation, signed a Memorandum of Understanding (MOU) with leading Korean shipbuilders such as HD Hyundai Heavy Industries, Samsung Heavy Industries, and Hanwha Ocean, formally establishing the US-Korea Shipbuilding Cooperation Investment Consultation Body. As US-Korea shipbuilding cooperation progresses continuously, the establishment of this investment consultation body is expected to further accelerate Korean shipbuilders' investments in the US, enhancing the certainty of their business operations there.
Growing FDC Market Interest to Potentially Boost Shipbuilder Profitability
Constrained by factors such as grid access and power supply, hyperscale cloud providers face significant challenges in constructing land-based data centers (DC). According to International Energy Agency (IEA) data, gas turbine equipment delivery schedules are already booked until 2030, and new transmission lines will not be completed until 2031 at the earliest; additionally, US grid interconnection approvals can take up to seven years. To overcome these bottlenecks, US hyperscale cloud providers are evaluating potential applications for Floating Data Centers (FDC). Since the beginning of this year, South Korea's three major shipyards—HD Hyundai Heavy Industries, Samsung Heavy Industries, and Hanwha Ocean—have received customer inquiries regarding FDCs and have successively initiated business feasibility studies or implementation plans. FDC profits are expected to surpass those of LNG carriers, currently the most profitable ship type in the industry. If FDC commercialization proceeds smoothly, it could enhance the overall profitability of shipbuilders.
Imminent Award of Substantial Canadian CPSP Project
The Canadian Patrol Submarine Project (CPSP) is expected to announce the winning bidder in the near future. According to Canada's Minister of Defence Procurement, proposals from both competing consortia meet the navy's technical requirements, with the government focusing its assessment on the economic benefits of each proposal. The Korean bidding team (including Hanwha Ocean and HD Hyundai Heavy Industries) is in fierce competition with a German team. The total project order size is 60 trillion won (with the submarine construction contract portion being 20 trillion won). A successful bid by the Korean side would be expected to substantially increase shipbuilder profits.
Upswing in Global Shipbuilding Cycle and Focus on Earnings Release
Driven by factors such as vessel aging, environmental regulations, and international geopolitics, the global shipbuilding cycle is trending upwards. From January to May 2026, global new ship orders totaled 1,309 vessels / 109 million deadweight tons, representing year-on-year increases of +11.59% and +140.19%, respectively. As of May, the global orderbook stood at 7,384 vessels / 200 million compensated gross tons (CGT), reaching another record high. Global shipbuilding capacity has been significantly rationalized, with production increasingly concentrated in large shipyards. China's three major shipbuilding indicators show comprehensive growth, solidifying its position as the world's leading shipbuilding nation. Korean shipbuilders have improved profitability through orders for high-value-added projects like LNG carriers, VLGCs, and FLNGs. The combined revenue margin for the three major shipyards—HD Hyundai Heavy Industries, Samsung Heavy Industries, and Hanwha Ocean—is forecasted to reach 14.5% in Q2 2026, a historical high.
Investment Recommendation
The global newbuilding market is performing strongly, with the shipbuilding upcycle persisting. China, leveraging its advantages in a complete industrial chain, advanced technological capabilities, and leading manufacturing prowess, remains the world's top shipbuilding nation, leading globally in the three major shipbuilding indicators for 16 consecutive years. Following the previous round of capacity rationalization, current global shipbuilding capacity is in short supply, with resources increasingly focused on leading shipyards. Chinese shipbuilders' orderbooks are filled until 2029-2030, with the proportion of high-value-added vessel types continuously rising. Amid the global shipbuilding upcycle, it is recommended to focus on the accelerated earnings release of Chinese shipbuilding companies.
Risk Factors
Risks include macroeconomic performance falling short of expectations; changes in geopolitical situations; disruptions from trade frictions; intensification of global market competition; and new order activity failing to meet expectations.