Oil Trader Ensnared in Scandal

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Hin Leong Trading, the giant oil trader at the center of one of Asia’s biggest current business scandals, is also a lubricants supplier with a blending plant in Singapore and one of China’s biggest independent grease producers.

The Singapore-based company – along with its shipping arm, Ocean Tankers – both filed in a Singapore court on April 17 for bankruptcy protection from creditors. In the filing, Hin Leong founder Lim Oon Kuin admitted that the company ran up $800 million in losses in recent years from oil futures trading and that he instructed the company’s finance department not to report them. The company reported a $78 million profit for the fiscal year ended last October but has actually lost money for several years, the filing said.

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The creditors from whom the company is seeking protection include 23 banks that are owed a combined $3.9 billion. On Tuesday Singapore’s police department confirmed that it has started an investigation of Hin Leong, according to local news organization CNA.

That same day, after banks objected to the bankruptcy filing, Hin Leong withdrew it and instead requested that PricewaterhouseCoopers be appointed judicial manager.

In its filing Hin Leong said the recent crash in oil prices made it impossible for the company to make loan repayments, and analysts warn that the case could lead financial institutions to rein in credit for the oil industry.

No such ramifications are expected for the lubricants industry, which is much smaller and where Hin Leong is a much smaller player. The company’s Singapore blending plant has capacity to make 50,000 metric tons per year of lubricants. It produces marine, automotive and industrial lubes marketed under the company’s HL Universal brand while also manufacturing for other lube companies under toll contracts.

Hin Leong also operates a 10,000 t/y grease plant in Fuzhou city, in China’s Fujian province, where the company has a second 50,000 t/y lubricant plant. On its website Hin Leong claims to be one of the three largest independent grease producers in China.

A Hin Leong official told Lube Report Thursday that the company’s lubricant business was operating normally, but he declined to answer further questions.

An official with another local lubricant company noted that Hin Leong distributes API Group II and III base oils imported by South Korean refiners and wondered if the oil trader’s problems would affect that supply chain.

“It would be interesting to know what these refineries would do with the distributorship,” said the official, who spoke on condition of anonymity. “Would the refineries appoint new distributors? Or they will go direct to respective blending plants to establish term contracts with them?”