Odfjell is set to release its first-quarter 2025 results on Wednesday. The company has indicated a slight decline in performance compared to the previous quarter, yet the focus remains on its longer-term prospects, especially in light of recent USTR port fee determinations. Currently, chemical tanker rates are on a gentle downward trend, but the widening price spread for chemicals between the US and Asia offers a glimmer of hope for improved rates.
We maintain a Buy recommendation for Odfjell while adjusting our target price downwards, primarily due to the weaker US dollar. The guidance for 1Q25 suggests solid financial results for Odfjell, though slightly underwhelming compared to 4Q24, attributed to lower spot volumes at the quarter’s start. Similar trends have been noted in its competitor, Stolt-Nielsen.
Both our projections and market consensus estimate EBIT to be around USD 60 million for 1Q25 and approximately USD 250 million for the entire fiscal year. In the context of US-China relations, the industry was keenly observing the public hearings on USTR section 301. It now appears that only a fraction of the initially proposed port fees will be enacted.
The revised plan is being rolled out in two phases. Phase 1, which commences after 180 days, will impose fees on Chinese vessel operators based on net tonnage per US voyage. Phase 2, to start in three years, will impose restrictions on foreign-built LNG vessels, gradually tightening over 22 years to boost the construction of US-built vessels.
An essential aspect for Odfjell is that USTR has announced some exemptions, particularly for vessels designed specifically for transporting chemicals in bulk liquid form. However, the lingering uncertainties from the current administration remain a concern. Despite a slow decline in chemical tanker rates over the past year, we expect stabilization throughout 2025, underlined by the widening price spread between US and Asian chemicals.
Consequently, we uphold a favorable outlook for Odfjell, albeit at a revised target price of NOK 135 per share, chiefly influenced by the US dollar’s weakening.