Stolt-Nielsen Sees Consolidation as Speculators Squeezed Out

Stolt-Nielsen Ltd, the world’s largest chemical tanker company, expects a market consolidation as overcapacity will force speculators out of business.

“There will be consolidations,” Chief Executive Officer Niels G. Stolt-Nielsen said in an interview in Oslo on Thursday. “If the price is right we will buy, merge, consolidate or form partnerships.”

The chemical tanker shipping market is struggling as an oversupply and decreasing demand for chemicals from China puts pressure on rates. Average freight rates for the London-based company fell by 2.6% in the first quarter, according to its quarterly report.

Stolt-Nielsen said the order book for new chemical tankers is about 30 percent of the existing fleet as hopes for increasing demand from U.S. shale gas has spurred shipbuilding in mainly China. He sees consolidation in the industry in the coming years.

“The market is going to be very tough and it will happen,” he said. “But it will take a couple of years before most of the equity has gone.”

Stolt-Nielsen expects “speculators who are not in the game for the long run” to be the first to exit the market.

“There will be consolidation and acquisition opportunities in the secondary market,” he said “We will keep our balance sheet strong so that we can grab any opportunity that may arise.”

Asset Play

Stolt-Nielsen’s first quarter revenue was $488 million compared with $517 million a year ago. Stolt Tankers reported revenue of $278 million.

While rates will continue to be low, Stolt-Nielsen, which transports chemicals for companies such as Dow Chemical Co., doesn’t plan to sell any ships.

“Selling ships, because of our contract portfolio, isn’t really an option,” he said. “We don’t operate in asset play, we provide a logistical service.”

Stolt-Nielsen sees growth in the company’s other businesses of tanker containers, terminals and liquid natural gas. He expects tank containers to grow, on average, 5 percent a year.

“We will maintain our position in the chemical tanker market and grow our other businesses,” he said.

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