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  • Singapore is one of the world's biggest oil-trading centers

  • and Hin Leong is a homegrown oil trader in Singapore.

  • Hin Leong has also always been very secretive.

  • It's held by its founder Oon Kuin Lim,

  • his son and his daughter.

  • So very little is actually known about Hin Leong.

  • And we've also got this fallout

  • from the Singapore oil trader, Hin Leong.

  • Investigations started in April

  • after Hin Leong filed for bankruptcy protection.

  • It was revealed that Lim had asked the company

  • to hide nearly a billion dollars in losses

  • from speculating oil futures over the years.

  • So it all started when we heard that major banks

  • were pulling financing from the oil trader Hin Leong.

  • And at first, we were shocked to hear this information.

  • Hin Leong is such a big name

  • in the Asian oil-trading industry

  • and why were the banks unwilling to finance

  • Hin Leong any further.

  • All the answers only came to us much later.

  • My name is Alfred Cang.

  • I'm a senior reporter with Bloomberg News.

  • I'm Serene Cheong.

  • I'm a reporter at Bloomberg.

  • Serene and I and other colleagues in Singapore office

  • wrote the story about the collapse of Hin Leong,

  • one of the biggest independent oil traders in the world.

  • So Hin Leong is in the business

  • of what we call bunkering,

  • which is to supply shipping fuel to all the vessels

  • that come into the Singapore ports for refueling.

  • It's actually owned and founded by Lim Oon Kuin,

  • also known as OK Lim.

  • OK Lim was born in Fujian province of China.

  • He immigrated to Singapore in 1950s.

  • From the associates who've known OK Lim for decades,

  • OK Lim was described as a low-key, humble,

  • aggressive oil trader

  • and always honest to his origin.

  • OK Lim likes dining in a Singapore-based chain restaurant

  • which serves his homeland food.

  • He is also known as a keen poker player.

  • He started off as a one-man, one-truck business.

  • He would buy fuel from oil majors,

  • parcel it up into smaller volumes

  • and resell it to taxi companies, to bus companies

  • as well as to fishing boats.

  • OK Lim's business later developed

  • to involve a lot more of these tank trucks

  • and later on, it also developed to include

  • an entire fleet of vessels

  • that will actually work as an integrated supply system

  • to allow him to buy, float and sell fuel to customers

  • around the region.

  • Hin Leong actually developed

  • alongside the Singapore oil trading hub.

  • And as more and more boats came to Singapore

  • to dock and refuel,

  • Hin Leong grew because it was opportunistically

  • at the right place at the right time.

  • So different from stock-market trading,

  • where information are basically available publicly,

  • oil traders in the world rely on the information

  • private to a small group and find the business opportunity.

  • Our understanding of OK Lim

  • is that he is a trader with a very big appetite for risk.

  • He's also one that thrives in the very opaque

  • and secretive market of oil trading in Asia.

  • So for example, at any one point in the Asian market,

  • no one trader would actually know

  • exactly how much supply and how much demand

  • there is at any given time.

  • OK Lim would reach deep into his resources

  • and leverage on his relationships with his counterparts

  • to actually figure out what exactly was happening

  • in the market

  • and therefore to make bold decisions to dominate the market

  • and create a trading position that's beneficial for himself.

  • Once they purchased enough physical stockpiles

  • in the market

  • and created disruptions

  • in a certain time of period and a certain area,

  • it did squeeze the market and push the prices higher.

  • In that case, Hin Leong and OK Lim can always sell

  • the inventories and sell the products to end users

  • or other merchants for profit.

  • This strategy was one of the source of his success

  • for decades but not for this time.

  • In April of 2020, my colleague and I

  • had heard that banks were pulling financing and credit lines

  • away from Hin Leong.

  • And as we know, financing, credit lines and liquidity

  • are the lifeblood of trading.

  • So we knew that something big was brewing,

  • but we just didn't know what it was yet.

  • And it was only in the coming weeks

  • that more information and the answers were unveiled.

  • Covid-19 brought the global economy to a screeching halt

  • and one industry hit particularly hard was oil.

  • In the USA, the price of oil has collapsed to a record low

  • as demand dries up and storage runs out.

  • The price of a barrel of West Texas Intermediate,

  • which is the benchmark for U.S. oil,

  • today traded as low as -$40 a barrel.

  • It's the first time the price has turned negative

  • in history.

  • According to the documents we've seen,

  • Hin Leong barely hedged the physical stockpiles

  • it's purchased.

  • So all of its physical stockpiles

  • are purely exposed to the market fluctuations.

  • Because the oil benchmark prices

  • slumped on coronavirus outbreaks in the world.

  • The value of physical stockpiles of Hin Leong reduced.

  • We know from our sources that OK Lim made opposition bets

  • on the oil prices because he believed

  • China will soon put the coronavirus in control

  • and the demand will recover very quickly.

  • So OK Lim was right in the first half of his prediction.

  • China did contain the outbreaks of coronavirus,

  • but what OK Lim didn't see is

  • the outbreak turn into a pandemic

  • and create larger demand destructions.

  • And banks start coming after him,

  • asking him to repay the unpaid debts.

  • Dozens of commercial and investment banks in Singapore

  • have a combined exposure of US$3.5 billion to Hin Leong,

  • of which HSBC had the biggest exposure of $600 million.

  • And other banks, such as DBS and ABN,

  • had more than $200 million exposure to Hin Leong.

  • So from speaking to our sources

  • and from documents that we obtained,

  • we came to realize that Hin Leong had actually not made

  • any profits for a couple of years

  • and that some of the oil that Hin Leong had used

  • for collaterals were actually already resold

  • to other customers.

  • It was shocking to see that the company had actually hid

  • $800 million in losses.

  • The growth model of Singapore,

  • the Southeast Asia and China has been changed

  • through these years.

  • And that could be part of the reason

  • why Hin Leong didn't make any profits.

  • Many countries start seeking replacement

  • of traditional fossil energy,

  • replacing them with renewable energy such as solar.

  • The coronavirus outbreak is just the trigger

  • of its collapse.

  • The founder of homegrown oil-trading firm

  • Hin Leong Trading has been charged with abetment of forgery

  • for the purpose of cheating.

  • Lim Oon Kuin allegedly asked an employee

  • to forge a document to state that Hin Leong had transferred

  • more than 1 million barrels of gas oil

  • to China Aviation Oil Corporation.

  • This document was allegedly used to secure

  • almost $77 million in trade funds

  • from a financial institution.

  • If found guilty, Lim could be jailed for up to 10 years

  • and fined.

  • Hin Leong and Lims is one of the most secretive

  • family businesses in Singapore.

  • Multiple attempts to Hin Leong and Lim's family for comments

  • went unsuccessful.

  • So after the Hin Leong episode,

  • when some banks found themselves with hundreds of millions

  • of dollars of losses,

  • we're seeing that the oil industry in Asia

  • is going through somewhat of an evolution

  • where smaller companies are finding it harder

  • to get credit lines and financing,

  • and even bigger companies, more reputable companies,

  • are also finding that credit lines are being shrunken.

Singapore is one of the world's biggest oil-trading centers

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How One of Asia’s Biggest Oil Empires Collapsed

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    joey joey posted on 2021/05/27
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