Odfjell posts its 1Q25 results on Wednesday. As the company guided a slightly weaker quarter, it does not seem as interesting as the longer-term future, mostly following the development of the USTR port fee decisions. Other than this, the chemical rates are currently on a slow decline trend, however, the spread of chemical prices in the US and Asia is widening thus signalling for a hopeful rate improvement. We stick to Buy recommendation, while the TP was reduced mainly due to weaker USD.
Slightly weaker 1Q25 guided
1Q25 was guided by the company to be another quarter of solid financial results, slightly below 4Q24 due to the lower spot volumes observed at the start of the quarter. Similar slight weakness was encountered in its peer Stolt-Nielsen. Both we and consensus predict around USD 60m in EBIT for 1Q25 and around USD 250m for FY25.
US vs. China update
The industry has been speculating about the outcome of the public hearings regarding the USTR section 301 and now it seems that just a fraction of firstly discussed port fees will be implemented. The revised proposal is now divided into two phases. Phase 1, which will begin after 180 days, involves the implementation of fees on Chinese vessel owners and operators based on net tonnage per U.S. voyage. Phase 2 will take effect three years from now and will introduce restrictions on foreign-built LNG vessels. These restrictions will tighten gradually over the next 22 years, with the aim of encouraging the construction of U.S.-built LNG vessels. Under the revised proposal, USTR plans to introduce a fee of USD 50 per net tonne on foreign vessels calling at US ports, starting October 14, 2025, following a 180-day grace period. The new charge will apply to Chinese vessel operators and vessel owners once per vessel rotation at the first US port of entry and will be capped at five assessments per vessel per year. The fee will rise annually for three years reaching up to USD 140 by April 2028. To limit potential impacts on smaller ports, USTR confirmed that the fee will not be imposed at every port of call but only on entry from a foreign destination. After an initial exemption period, a fee will be imposed on Chinese-built vessels not operated by Chinese operators, starting at USD 18 per net ton in October 2025, rising to USD 33 per net ton by April 2028, which is the equivalent of USD 120 per container starting October 14, 2025, rising to USD 250 per container from April 17, 2028. The fee will be charged up to five times per year per vessel.
What is the most crucial for Odfjell is that the USTR also announced some exemptions. Most notably, exemptions for “specialized or special purpose-built vessels for the transport of chemical substances in bulk liquid forms”. However, this Trump administration might think of anything, so the uncertainty persists.
Chemical prices spread is positive
Although the chemical tanker rates are slowly declining basically over the last twelve months, we anticipate more stabilization to come into the picture during 2025. This is reassured by seeing the spread of chemicals prices in the US and Asia widening. Thus, we keep our positive stance towards the stock albeit with the lower Target Price of NOK 135/sh (150) with weakening USD mostly to blame for a reduction.
Source: Norne Research