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How One of Asia鈥檚 Biggest Oil Empires Collapsed - YouTube
Channel: Bloomberg Quicktake: Originals
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Singapore is one of the world's
biggest oil-trading centers
[8]
and Hin Leong is a homegrown
oil trader in Singapore.
[13]
Hin Leong has also always
been very secretive.
[17]
It's held by its founder Oon Kuin Lim,
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his son and his daughter.
[22]
So very little is actually
known about Hin Leong.
[25]
And we've also got this fallout
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from the Singapore oil trader, Hin Leong.
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Investigations started in April
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after Hin Leong filed for
bankruptcy protection.
[35]
It was revealed that Lim
had asked the company
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to hide nearly a billion dollars in losses
[40]
from speculating oil
futures over the years.
[44]
So it all started when
we heard that major banks
[49]
were pulling financing from
the oil trader Hin Leong.
[52]
And at first, we were shocked
to hear this information.
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Hin Leong is such a big name
[58]
in the Asian oil-trading industry
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and why were the banks
unwilling to finance
[63]
Hin Leong any further.
[66]
All the answers only
came to us much later.
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My name is Alfred Cang.
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I'm a senior reporter with Bloomberg News.
[81]
I'm Serene Cheong.
[83]
I'm a reporter at Bloomberg.
[85]
Serene and I and other
colleagues in Singapore office
[88]
wrote the story about the
collapse of Hin Leong,
[92]
one of the biggest independent
oil traders in the world.
[96]
So Hin Leong is in the business
[98]
of what we call bunkering,
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which is to supply shipping
fuel to all the vessels
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that come into the Singapore
ports for refueling.
[108]
It's actually owned and
founded by Lim Oon Kuin,
[113]
also known as OK Lim.
[115]
OK Lim was born in
Fujian province of China.
[118]
He immigrated to Singapore in 1950s.
[122]
From the associates who've
known OK Lim for decades,
[127]
OK Lim was described as a low-key, humble,
[131]
aggressive oil trader
[133]
and always honest to his origin.
[136]
OK Lim likes dining in a
Singapore-based chain restaurant
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which serves his homeland food.
[144]
He is also known as a keen poker player.
[150]
He started off as a
one-man, one-truck business.
[154]
He would buy fuel from oil majors,
[158]
parcel it up into smaller volumes
[161]
and resell it to taxi
companies, to bus companies
[165]
as well as to fishing boats.
[167]
OK Lim's business later developed
[170]
to involve a lot more of these tank trucks
[173]
and later on, it also developed to include
[177]
an entire fleet of vessels
[180]
that will actually work as
an integrated supply system
[184]
to allow him to buy, float
and sell fuel to customers
[190]
around the region.
[191]
Hin Leong actually developed
[193]
alongside the Singapore oil trading hub.
[197]
And as more and more
boats came to Singapore
[200]
to dock and refuel,
[202]
Hin Leong grew because
it was opportunistically
[204]
at the right place at the right time.
[211]
So different from stock-market trading,
[214]
where information are
basically available publicly,
[218]
oil traders in the world
rely on the information
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private to a small group and
find the business opportunity.
[227]
Our understanding of OK Lim
[229]
is that he is a trader with
a very big appetite for risk.
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He's also one that
thrives in the very opaque
[237]
and secretive market
of oil trading in Asia.
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So for example, at any one
point in the Asian market,
[245]
no one trader would actually know
[247]
exactly how much supply
and how much demand
[251]
there is at any given time.
[253]
OK Lim would reach deep into his resources
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and leverage on his relationships
with his counterparts
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to actually figure out
what exactly was happening
[264]
in the market
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and therefore to make bold
decisions to dominate the market
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and create a trading position
that's beneficial for himself.
[273]
Once they purchased
enough physical stockpiles
[277]
in the market
[278]
and created disruptions
[283]
in a certain time of
period and a certain area,
[287]
it did squeeze the market
and push the prices higher.
[291]
In that case, Hin Leong
and OK Lim can always sell
[295]
the inventories and sell
the products to end users
[299]
or other merchants for profit.
[302]
This strategy was one of
the source of his success
[307]
for decades but not for this time.
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In April of 2020, my colleague and I
[320]
had heard that banks were pulling
financing and credit lines
[324]
away from Hin Leong.
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And as we know, financing,
credit lines and liquidity
[329]
are the lifeblood of trading.
[331]
So we knew that something big was brewing,
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but we just didn't know what it was yet.
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And it was only in the coming weeks
[338]
that more information and
the answers were unveiled.
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Covid-19 brought the global
economy to a screeching halt
[347]
and one industry hit
particularly hard was oil.
[349]
In the USA, the price of oil
has collapsed to a record low
[353]
as demand dries up and storage runs out.
[356]
The price of a barrel of
West Texas Intermediate,
[359]
which is the benchmark for U.S. oil,
[361]
today traded as low as -$40 a barrel.
[365]
It's the first time the
price has turned negative
[367]
in history.
[368]
According to the documents we've seen,
[370]
Hin Leong barely hedged
the physical stockpiles
[374]
it's purchased.
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So all of its physical stockpiles
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are purely exposed to
the market fluctuations.
[383]
Because the oil benchmark prices
[386]
slumped on coronavirus
outbreaks in the world.
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The value of physical
stockpiles of Hin Leong reduced.
[394]
We know from our sources that
OK Lim made opposition bets
[398]
on the oil prices because he believed
[401]
China will soon put the
coronavirus in control
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and the demand will recover very quickly.
[408]
So OK Lim was right in the
first half of his prediction.
[413]
China did contain the
outbreaks of coronavirus,
[418]
but what OK Lim didn't see is
[421]
the outbreak turn into a pandemic
[424]
and create larger demand destructions.
[429]
And banks start coming after him,
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asking him to repay the unpaid debts.
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Dozens of commercial and
investment banks in Singapore
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have a combined exposure of
US$3.5 billion to Hin Leong,
[446]
of which HSBC had the biggest
exposure of $600 million.
[452]
And other banks, such as DBS and ABN,
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had more than $200 million
exposure to Hin Leong.
[461]
So from speaking to our sources
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and from documents that we obtained,
[466]
we came to realize that Hin
Leong had actually not made
[471]
any profits for a couple of years
[474]
and that some of the oil
that Hin Leong had used
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for collaterals were
actually already resold
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to other customers.
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It was shocking to see that
the company had actually hid
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$800 million in losses.
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The growth model of Singapore,
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the Southeast Asia and
China has been changed
[499]
through these years.
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And that could be part of the reason
[503]
why Hin Leong didn't make any profits.
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Many countries start seeking replacement
[511]
of traditional fossil energy,
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replacing them with renewable
energy such as solar.
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The coronavirus outbreak
is just the trigger
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of its collapse.
[525]
The founder of homegrown oil-trading firm
[527]
Hin Leong Trading has been
charged with abetment of forgery
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for the purpose of cheating.
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Lim Oon Kuin allegedly asked an employee
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to forge a document to state
that Hin Leong had transferred
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more than 1 million barrels of gas oil
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to China Aviation Oil Corporation.
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This document was allegedly used to secure
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almost $77 million in trade funds
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from a financial institution.
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If found guilty, Lim could
be jailed for up to 10 years
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and fined.
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Hin Leong and Lims is
one of the most secretive
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family businesses in Singapore.
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Multiple attempts to Hin Leong
and Lim's family for comments
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went unsuccessful.
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So after the Hin Leong episode,
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when some banks found themselves
with hundreds of millions
[580]
of dollars of losses,
[582]
we're seeing that the oil industry in Asia
[584]
is going through somewhat of an evolution
[588]
where smaller companies
are finding it harder
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to get credit lines and financing,
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and even bigger companies,
more reputable companies,
[597]
are also finding that credit
lines are being shrunken.
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