(Corrects paragraph 19 to "...Tokyo Marine Asia Pte Ltd, a unit
of Mitsui O.S.K. Lines Ltd", from "...Tokio Marine Asia Pte Ltd,
an affiliate of insurer Tokio Marine Holdings Inc")
* Cheap shale gas drives increase in U.S. chemical
* Demand for chemical tankers seen exceeding supply in 2014
* Stolt-Nielsen, Odfjell, Ardmore set to gain - analysts
By Swetha Gopinath and Garima Goel
Nov 1 After four years in the doldrums, the
specialized chemical tankers that ply the seas between the
United States and Asia are set to generate bumper profits for
the handful of companies that own and operate them.
A surge in U.S. chemical production, fueled by cheap natural
gas, is beginning to outpace capacity aboard a limited global
fleet - a shortage that analysts expect to peak in 2015.
With chemical tankers in scarce supply, companies such as
Ardmore Shipping Corp and Norwegian peers Stolt-Nielsen
Ltd and Odfjell SE will be able to command
"I don't think I have ever seen a more compelling set-up for
a recovery than we have in the chemical sector today," said
Anthony Gurnee, Ardmore's chief executive and a 30-year veteran
of the shipping business.
An abundance of cheap natural gas from American shale
deposits has spurred companies such as Exxon Mobil Corp
and Dow Chemical Co to spend big on the construction or
expansion of chemical plants.
The American Chemistry Council, a trade association, says
about $85 billion of chemical industry investments in the United
States have been announced in the last few years.
Several analysts said rising U.S. exports of chemicals such
as ethylene, a basic building block in plastics and textiles,
would drive a 5 percent to 6 percent annual rise in global
demand for chemical tankers over the next three years.
But world chemical-tanker tonnage is expected to grow by
less than half a percent in 2015, they said.
With an existing fleet of more than 150 ships and barges
that can carry chemicals and other bulk liquids, Stolt-Nielsen
will be one of the main beneficiaries, said Eirik Haavaldsen, an
analyst at Oslo investment bank Pareto Securities AS.
The company's stock, which has risen 66 percent this year to
close at 168.50 Norwegian krone on Thursday, should be worth 292
krone, according to Thomson Reuters StarMine's intrinsic value
The model is a measure of a stock's current value when
considering analysts' growth estimates for five years, and then
modeling the growth trajectory over a longer period of time.
"The order book for new buildings is moderate relative to
the existing fleet and we therefore forecast better utilization
for chemical tankers," said Jarle Sjo, chief investment officer
at Oslo fund management firm ODIN Forvaltning AS.
With a stake of nearly 3 percent, ODIN Forvaltning is the
fourth-largest shareholder in Stolt-Nielsen, whose chemical
tanker business turned profitable in August for the first time
More complex in its construction than an oil tanker or dry
bulk carrier, a sophisticated chemical carrier can have up to 50
tanks, often encased in stainless steel, to segregate low
volumes of potentially hazardous materials.
Few shipyards have the expertise to build these specialized
vessels, and those that do have little incentive as long as
demand remains strong for more cost-effective oil tankers.
"There are not a lot of operators with the ability to place
orders for sophisticated tonnage or yards that can build them at
competitive prices," said Julian Villar, a spokesman for
A chemical tanker ordered today, say analysts, would be
unlikely to be delivered before 2015.
This will work to the advantage of tanker operators with
ships already on the water.
Some of these are privately owned, such as Fairfield
Chemical Carriers Inc, Navig8 Chemicals, Nordic Tankers and
Tokyo Marine Asia Pte Ltd, a unit of Mitsui O.S.K. Lines Ltd
Of the publicly traded operators, Odfjell has a fleet of 96
chemical tankers. By 2015, Ardmore plans to have a 20-tanker
fleet that will include 18 ships capable of carrying chemicals.
Chemical shipments are already rising. U.S. chemical exports
in August were worth $16.8 billion, 5 percent more than in
January, according to Department of Commerce data.
As exports rise, the rates charged for the use of large
chemical tankers are likely to increase to more than $17,000 per
day in 2015 from $14,000 this year, several analysts said.
"Every $1,000-a-day increase in product rates across our
fleet results in a 40-cent increase in cashflow per share," said
Gurnee, a former U.S. Navy officer now living in Ireland, where
Ardmore has its headquarters in the city of Cork.
Ardmore's stock, which debuted on the New York Stock
Exchange in July, closed on Thursday at $13.08 - nearly $1.00
below the initial public offering price of $14.00.
But the company is trading at an enterprise value to EBITDA
multiple of 13.7 times, Evercore Partners analysts said. This
represents a 28 percent discount to its peer group average.
Ardmore's biggest shareholder, with a 44 percent stake, is
Greenbriar Equity Group LLC, a New York-based private equity
firm that focuses on transportation.
Reginald Jones, Greenbriar's co-founder, told Reuters the
company had no interest in selling its shares. "We think they
are tremendously undervalued," he said.
(Editing by Sayantani Ghosh and Robin Paxton)