Stolt outlook cut

Shifting sentiment in the sector and expectations that rate drops will hurt Stolt’s fourth quarter earnings are behind the move, the bank says.

Anders Karlsen, senior shipping analyst at Nordea, dropped his rating on Stolt from “Strong buy” to “Buy”. His target price was cut from $27.60 per share to $17.50 per share.

In a note to investors, Karlsen said: “Demand for chemicals is diminishing and large producers are scaling back production, which will hurt chemical trade.

“We expect Stolt-Nielsen to suffer from a decrease in seaborne cargo volumes for its chemical tankers and containers. We also forecast a decline in storage throughput volumes.”

A fall in the number of cargoes in the sector will increase competition and accentuate the fall in rates, he explains.

“We have seen rate reductions in the chemical tanker market, which we expect to hit Stolt-Nielsen’s results as of Q4 2008,” Karlsen said.

“Cargo volumes under contracts of affreightment are down but trading volumes more so. This will also impact the Tank Terminals and Tank Containers businesses.”

Looking forward, he added: ”At about 70% contract coverage for its chemical tankers, Stolt-Nielsen should be in a better position than many of its competitors in a falling market. It is also likely that in response to the changes in market sentiment, the company will reduce its tank container capacity.”

Stolt shares lost 1.71% to NOK 72 ($10.50) each in Oslo this morning, valuing the company at NOK 4.29bn.