Asia/Pacific News
Trading Companies Quit Singapore Tank Leases
Citing low margins and high rentals costs, some fuel-trading firms are no longer leasing storage tanks in Singapore, Reuters reports.
Sources said Marubeni Corp subsidiary Marubeni International Petroleum Singapore (MIPCO), Sumitomo Corp trading arm Petrosummit, and Itochu Corp have all given up leases in Singapore, the world's largest marine fuels market by volume.
"There is no margin - too much competition and demand is not so good," said one trader.
"We cannot cover tank costs by just trading HSFO (high-sulphur fuel oil)."
The companies get a $1 premium for each tonne of fuel oil sold from tanks in the market, but the monthly cost of leasing storage tanks stands at around $6 per cubic meter, with a tonne of fuel requiring about one cubic meter of storage space.
Partly because of congestion at some terminals, the rate at which oil is turned over from the storage tanks is lower than one a month, sources told Reuters.
The companies have also had difficulty hedging their cargoes due to a market said to have been in backwardation for much of the past two years.
"It's becoming pure speculation if we can make money or not," one trader said.
Some new and existing companies have signed leases on storage tanks in Singapore, but rates have fallen about 10 percent because of overall loss in demand.
Earlier this year Chemoil Energy Limited [AV5.SI] (Chemoil) completed the sale of its storage facility on Jurong Island in Singapore.
