Asia/Pacific News
Update 1: Traders: Singapore in "Complete Chaos" Following OW Bunker Collapse, Others Disagree
- Update 1 - Added quotes from Simon Neo
The Singapore bunker market is in "complete chaos" following the collapse of OW Bunker, according to some local traders, and further bankruptcies are set to follow, Shipping Watch reports.
Ex-wharf fuel sellers and barging companies have reportedly been incredibly cautious since last week's events, and with credit lines cut to their absolute minimum, the need for cash payments or bank guarantees is putting pressure on the market.
"Singapore is in complete chaos. Bunker fuel suppliers demand guarantees for payments from physical suppliers, of which there are many in Singapore," a source said.
"So we're seeing a price hike and increases from around the time OW Bunker went bankrupt."
But industry veteran Simon Neo, Executive Director, Piroj International, said that the comments dramatically overstate the actual situation in the market.
"There are some issues with the financial market due to the fallout of OW but to say it is completely in chaos, this is not correct," Neo told Ship & Bunker.
"Do we see this happening in the ARA region or Fujairah or South Korea or Hong Kong or any other part of the world whereby OW also has a strong presence?"
And the former Chairman of the International Bunker Industry Association (IBIA) said that he has not experienced any particular issues since last week's events, despite the tightening of credit terms, and suggested that some players may be taking advantage of the situation to drive up prices.
"It is true that banks have cut credit to many companies, as international and local bank lost confidence in the industry world wide. The only issue was prices has gone up due to the increase in financing cost and maybe there are some companies who are taking advantage of the situation to make quick bucks," he said.
"I was still able to stem a 3000mt bunker order yesterday for delivery on the 17 November with ease and another of my order which was delivered last week was completed without any issues.
"From what I hear suppliers are still able to load from the oil terminal as long as they are able to give guarantee from banks or have valid lines of credit to the cargo traders."
Bunker price data from Ship & Bunker showed that last Wednesday when OW Bunker said it was informed of a $125 million fraud at its Singapore-based trading subsidiary Dynamic Oil Trading, plus it had incurred a risk management related loss of $150 million, bunker prices in Singapore were at their lowest point in several years.
Since then, prices have been rising and on Tuesday key grade IFO380 had spiked to a four-week high.
"If the cost of business goes up, then no matter what oil does the cost of bunkers is going to go up too," another source told Ship & Bunker.
OW Bunker filed for bankruptcy last Friday.
On Tuesday the Maritime and Port Authority of Singapore (MPA) said that as OW Bunker accounted for less than three percent of the port's sales volume in 2013, its bankruptcy will have minimal disruption to bunker supply in Singapore.
