Stolt Nielsen: Waiting for chemicals to catch up

Stolt-Nielsen's third quarter figures for 2026 were in line with market expectations but slightly below the company's own projections. This was due to increased bunker costs offsetting higher spot rates. While conflicts in the Middle East have boosted crude and product tanker earnings, chemical tankers have only benefited partially.

However, the outlook for the fourth quarter of 2026 is expected to be slightly softer, but depleted chemical inventories suggest a forthcoming restocking cycle. Despite lowering our estimates, we maintain a "Hold" rating with a higher target price of NOK 405 per share (previously NOK 385), primarily due to the improved debt profile.

The strong spot rates were counterbalanced by higher bunker costs, resulting in an adjusted EBITDA of USD 184.4 million, which was in line with expectations but 4.5% below our forecast. Stolt Tankers' operating profit of USD 52.1 million fell short of our estimate of USD 63 million, as higher spot rates were tempered by a 40.5% increase in bunker costs and a 22.1% decrease in spot volumes.

Deep-sea TCE stood at USD 24,121 per day, a 2.9% decrease year-over-year but a 3.2% increase quarter-over-quarter. New financing, comprising a USD 165 million newbuilding loan and a USD 370 million revolving credit facility, further bolstered the company's debt profile. Recent disruptions around Hormuz and the Red Sea have driven crude tanker earnings to record highs, benefiting from longer ton-miles, elevated risk premiums, and bullish sentiment.

With approximately 70% of pre-war crude volumes now transported via pipelines and ship-to-ship transfers, conventional tankers have emerged as the primary winners. However, chemical tanker rates have only recovered modestly, hampered by lost volumes, feedstock shortages, and low production. Chemical volumes remain roughly 15% below pre-war levels, as feedstock shortages and elevated prices have driven inventories to multi-year lows, particularly in Asia.

This will necessitate a prolonged restocking period. Simultaneously, robust product tanker markets are anticipated to keep swing tonnage out of chemical trades well into 2027. Our stance remains unchanged due to limited and intricate market visibility. The diversified business model continues to bolster the investment case, with non-tanker segments accounting for around 50% of the company's 3Q26 EBITDA.

Overall financial performance is anticipated to be slightly softer compared to 3Q26. Despite slightly reducing our near-term estimates, we have raised our target price to NOK 405 per share, primarily driven by the improved debt profile following the deconsolidation of Avenir LNG.