Trafigura, Gunvor take Hin Leong's storage leases at Singapore Universal Terminal: sources

Singapore — Oil traders Trafigura and Gunvor have taken over the fuel oil storage leases previously under Hin Leong at Singapore's Universal Terminal, two fuel oil traders and one terminal operator said recently.

The storage leases were re-allotted after Hin Leong went into judicial management in April on account of trading losses and a liquidity crunch, which forced it to halt its trading operations and utilization of any storage it controlled.

Hin Leong controlled about 240,000 cubic meters of capacity at Universal Terminal for fuel oil and is no longer storing fuel oil there. Trafigura has taken 140,000 cu m of Hin Leong's former capacity, and 100,000 cu m was taken by Gunvor, the sources said.

As a result, Trafigura has increased its storage capacity at Universal Terminal to a total 220,000 cu m and Gunvor to 240,000 cm in the third quarter, the sources said.

When contacted, Trafigura said it does not answer commercially sensitive questions regarding storage contracts and capacities, while a spokesman at Gunvor said he could not confirm or deny the claim. Hin Leong did not reply to emailed queries.

There is strong demand for onshore fuel oil tanks in Singapore, Asia's largest oil trading hub, as the Marine Fuel 0.5%S market structure has been in a contango since late July.

"Landed terminals in Singapore are likely fully occupied until mid next year," an industry source said.

At the Asian close on Aug. 24, S&P Global Platts assessed the September-October spread at minus $2.90/mt, down from minus $2.75/mt on Aug. 21.

In addition, ex-wharf bunker fuel premiums have been climbing since the International Maritime Organization reduced the global sulfur cap for marine fuels to 0.5% sulfur at the start of this year, making it more affordable for fuel oil traders to store marine fuel at onshore terminals. The spread between ex-wharf Marine Fuel 0.5%S bunker and Marine Fuel 0.5%S cargo, otherwise known as the ex-wharf bunker premium, has averaged $17.27/mt year-to-date, Platts data showed. This compares with the typical $5-$10/mt high sulfur ex-wharf bunker premiums, which lasted till last year.

Hin Leong

When Singapore trader Hin Leong went into judicial management, there were concerns over the volume of oil products stored in tanks at Universal Terminal and on barges and tankers it had used as storage and transport, due mainly to the multiple claims the trading company had engaged in reselling volumes already pledged to banks for inventory financing.

On April 22, Sembcorp Industries terminated the gasoil supply and storage agreement between its subsidiary Sembcorp Cogen and Hin Leong, under which gasoil reserves purchased from Hin Leong were stored and managed on behalf of Sembcorp Cogen at Universal Terminal. A week later, Sembcorp said it had commenced legal proceedings to assert its ownership of the gasoil reserves stored in designated tanks at Universal Terminal, saying, "There is a possibility that the gasoil reserves designated for Sembcorp Cogen may be subject to competing claims by one or more third parties."

But market participants said Universal Terminal was keen to protect its storage business from the ramifications of the Hin Leong collapse and took measures to maintain customer confidence that their storage volumes would not be disputed.

A report by the interim judicial managers of Hin Leong's operations, filed in court in June, stated as of May 20 Hin Leong's total available inventory amounted to $212 million, based on independent stock assessments at Universal Terminal, barges and vessels chartered from Ocean Tankers and tank records.

Out of this $212 million, $118.5 million worth of stocks were stored at Universal Terminal, while the remaining $93.5 million worth was parked in vessels and barges chartered from Ocean Tankers. Out of the $118.5 million worth of oil products in Universal Terminal, $79.9 million was under court injunction due to competing claims.

The report stated inventory in Hin Leong's audited financial statements may have been overstated by around $812.2 million, with most of the shortfall stored on tankers.