Singapore’s marine fuel market has remained resilient since the collapse of oil trader Hin Leong in 2020, with the latest action involving the freezing of assets belonging to its founder Oon Kuin Lim and his two children reflecting the stern action taken against industry malpractices, reposing faith in the local bunker market and reinforcing its commitment to transparency, industry sources told S&P Global Platts.
“This [the Hin Leong case] is a very relevant issue; sadly our industry has been plagued by bankruptcies since the OW case and this has generated a – wrong – perception of a sector populated by unprofessional and unreliable companies,” a bunker supplier said.
“The reality is that most of the key players in the bunker industry are solid and organized and we need to continue to push for more transparency and better governance,” he added.
OK Lim was charged in a Singapore court in mid-August 2020 with abetment of forgery for the purpose of cheating after investigations by the Commercial Affairs Department into Hin Leong’s business activities, Platts reported.
The latest action entails Singapore’s High Court approving a request to freeze as much as $3.5 billion in assets belonging to the Lim family behind Hin Leong, according to local media reports.
The asset freeze order paves the way for the company’s bank creditors to recover their debts at a time when commodity banks are grappling with the tough market conditions created by the global coronavirus pandemic, industry sources said.
Hin Leong’s collapse inculcated a greater focus on counterparty risks, a bunker trader said. “I think we are going in the right direction…It goes hand in hand with our approach to the market, in being open and transparent,” he added.
Greater emphasis has also been placed on enhancing commodity financing standards in Singapore. “Banks are taking a collaborative approach to develop a set of best practices for the commodities industry and will be consulting the trading companies,” the Monetary Authority of Singapore said in a statement last year.
Ocean Tankers plight
Ocean Tankers, a Hin Leong subsidiary, is now under judicial management and its ships are under the supervision of other sister companies, including the Xihe Group.
When the bankruptcy proceedings were launched into parent company Hin Leong last year, Ocean Tankers had more than 130 tankers and barges.
Due to a cash crunch and because of difficulty in meeting the expenses involved, most of these ships are being gradually sold off, sources with a direct knowledge of the matter said.
However, they said more than half of these ships are still unsold and the total amount that has accrued from the sales so far is less than $500 million. Hin Leong’s judicial managers could not be immediately reached for comment, but sources said that sale proceeds are placed in a Special Purpose Vehicle or SPV.
Unless the sales of such tankers are complete, charterers are reluctant to hire them for voyages due to the fear of them being arrested by any of the creditors whose debts are unpaid, sources said. This lack of chartering and therefore revenue in turn is making it difficult for the company to service the same debts, they said.
“It’s a cycle under which the expenses can only be met if the ships are chartered but that is easier if they are sold off and ownership is transferred to other companies,” one such source said. There are competing legal claims by multiple parties on the parent company and, by extension, on the subsidiaries as well.
At least three Chinese-built VLCCs were purchased by Maran Tankers last year for $110 million combined, brokers tracking these deals said.
Bunker market unscathed
Singapore is the world’s largest bunkering port and an important regional storage, blending and distribution hub for refined oil products.
At the start of May 2020, as the Hin Leong crisis unfolded, the Singapore delivered Marine Fuel 0.5%S bunker premium over benchmark FOB Singapore Marine Fuel 0.5%S cargo was at an 8-week high of $36.08/mt. As of May 24, 2021, it was $6.19/mt, according to Platts data.
“There is no foreseeable impact on the bunkering industry [now],” a Singapore-based trader said.
“The order to freeze those assets [belonging to the Lim family] would not diminish the capacity of Singapore’s bunkering scene, especially when the market is already oversupplied,” he added.
Owners have been “long on barges” due to the lackluster time-chartering market amid tepid demand, a Singapore-based barge operator said.
Even last year when Hin Leong collapsed, the Maritime and Port Authority was quick in awarding two new bunker supplier licenses to Minerva Bunkering and TFG Marine to fill the void left by Hin Leong, sources said.
The entry of new players brought in some competition. However, overall, the fundamentals of Singapore’s bunker industry remain unchanged, another bunker supplier said, adding that the city-port’s bunker sales remained robust despite this setback.
Source: Platts
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