Stolt-Nielson Predicts Weak Chemical Tanker Market for the Next 3 Years

Jens F. Grüner-Hegge, Vice President of Corporate Finance at Stolt-Neilsen, says there are too many ships and not enough cargo.

Jens F. Grüner-Hegge, Vice President of Corporate Finance at Stolt-Neilsen Limited predicts a difficult next three years for chemical tankers, ShippingWatch reports.

Grüner-Hegge told ShippingWatch "it's difficult to see a real improvement in the market before 2018."

According to Grüner-Hegge, the weak market for chemical tankers is a result of an influx of capital from private equity funds meaning too many companies are now working solely as tonnage suppliers, creating a situation of too many ships and not enough cargo.

"This is a consequence that dates back a few years, from when the orderbook was very little, when there was cheap capital available and significant capacity at the yards," he says.

"This creates a split between the owner and the charterer in terms of profits, and this is not a healthy structure for our industry. It creates a mentality of booking cargoes at all costs, regardless of the freight rate, and this is not good."

Though more chemical tankers are expected to be in operation next year thus furthering the competition, Grüner-Hegge urges that "this development is very temporary."

Some form of market consolidation was said to be needed for the market to improve, and Grüner-Hegge says this is where the equity funds could feature once again.

"They (equity funds) have discovered that the possibility of getting in and scoring a quick payoff is no longer available," he says.

"A number of them are probably feeling a little stuck, and I think we'll see some consolidation among players looking to reach a size where they can become listed on the exchanges, and in this way the private equity funds could get away from this."

Last month Stolt-Nielsen reported a profit of $38.7 million for Q1 2015 compared to $13.1 million in the prior quarter, crediting falling bunker prices for this near tripling of profits.