Singapore shipping fuel scandal sends traders scrambling

[CityFarmer]

Any impact on Singapore listed companies?

Singapore shipping fuel scandal sends traders scrambling

SINGAPORE — Traders and shipping companies scrambled to source fuel and take over supply contracts today (Nov 7) after Danish marine fuel supplier OW Bunker said a suspected fraud at its Singapore subsidiary had pushed it to the brink of bankruptcy.

The alleged fraud at Singapore-based Dynamic Oil Trading is potentially one of the biggest financial market scandals to hit the city state since 2004, when China Aviation Oil (Singapore) ran up oil futures losses of US$550 million (S$712 million).
...
http://www.todayonline.com/singapore/sin...scrambling

[Greenrookie]

A bit more reporting here.

http://www.hellenicshippingnews.com/ship...ankruptcy/
The article mentions most shippers only pay when the fuel is delievered, shielding them from potential losses.

Hmm...

Assume the worst, what domino are we looking at?

Weaker shippers do not get their oil, or lost money and become bankrupt??

Cannot quite understand, the supplier lost money due to wrong side of hedging, sum involved is 150 mio. Do not seem like a lot of money that will bring shippers down. Assume a few shippers go down, there is already excess supply, what can shippers bring down with them? Bulk rates and freight rate is low, the big players will boy be affected,maybe some smaller player of transshipment?

Can't understand where is the domino?

Maybe buddies can enlighten?

[opmi]

Frauds seems to be exposed during big movements in asset prices. E.g. Barings/Sumitomo/Madoff. That's unknown unknown that people are afraid of.

[greengiraffe]

OW Bunker = CAO

2014 = 2004

Rogue Traders
GG

[Greenrookie]

OW Bunker = CAO

2014 = 2004

Rogue Traders
GG

But CAO fiasco did not create any domino lei, some aversion to s-chips that's all. The rest of the market is on the beginning of bull market and the party goes on

[em2nre5u]

A bit more reporting here.

http://www.hellenicshippingnews.com/ship...ankruptcy/
The article mentions most shippers only pay when the fuel is delievered, shielding them from potential losses.

Hmm...

Assume the worst, what domino are we looking at?

Weaker shippers do not get their oil, or lost money and become bankrupt??

Cannot quite understand, the supplier lost money due to wrong side of hedging, sum involved is 150 mio. Do not seem like a lot of money that will bring shippers down. Assume a few shippers go down, there is already excess supply, what can shippers bring down with them? Bulk rates and freight rate is low, the big players will boy be affected,maybe some smaller player of transshipment?

Can't understand where is the domino?

Maybe buddies can enlighten?

I guess some shippers may lose money via:
1) Some advance payments made to OW that can't be claimed back due to bankruptcy
2) Unable to secure sufficient new fuel supply at the last minute. Thus some ships have to be grounded, losing revenue and having to pay for delays

Suppliers (refineries etc) may lose money via:
Overproduction. OW may have overcommitted to take more deliveries than it can find matching buyers. Thus suppliers may have to reduce prices on excess stock.

[AlphaQuant]

Can't understand where is the domino?

I will guess the fear of contagion, which was what happened in the GFC (and actually all crises).

If A goes down, B might cease dealing with C (and vice versa, as well for all other thousands of names) for fear of the unknown. Does B hold the same positions as A? Is B a counterparty-risk of A? Even payments become an issue. Think abt it, if you are supposed to be paid $1mio from B, and you are supposed to pay C $1mio on the same day, theoretically you are flat and safe. But dare you pay C first before you see the money from B? And since you do not dare to pay C first, why should B pay you first? Firms with huge -ve working capital without access to bank credit lines might end up facing serious cashflow issues.

And so you can extrapolate the freeze into the web .

[CityFarmer]

Can't understand where is the domino?

I will guess the fear of contagion, which was what happened in the GFC (and actually all crises).

If A goes down, B might cease dealing with C (and vice versa, as well for all other thousands of names) for fear of the unknown. Does B hold the same positions as A? Is B a counterparty-risk of A? Even payments become an issue. Think abt it, if you are supposed to be paid $1mio from B, and you are supposed to pay C $1mio on the same day, theoretically you are flat and safe. But dare you pay C first before you see the money from B? And since you do not dare to pay C first, why should B pay you first? Firms with huge -ve working capital without access to bank credit lines might end up facing serious cashflow issues.

And so you can extrapolate the freeze into the web .

That is the moment, "trust" is most valuable

[CityFarmer]

Official statement from MPA on the scandal. The disruption might be restricted to counter-parties...

Little disruption to bunker supply after OW Bunker bankruptcy: MPA

SINGAPORE — Singapore’s Maritime and Port Authority (MPA) said today (Nov 11) that it expects minimal disruption to supplies of bunker shipping fuel in the country’s port following the bankruptcy of Denmark’s OW Bunker.

“There are currently more than 60 bunker suppliers in Singapore, and OW Bunker Far East (Singapore) Pte Ltd accounted for less than 3 per cent of the 42.6 million metric tonnes supplied in Singapore in 2013,” the MPA said in a statement.

It added that it was now working with the Singapore Shipping Association and International Bunker Industry Association to try to limit the impact of OW Bunker’s demise on operations in its port, which is the the world’s largest for bunkering.
...
http://www.todayonline.com/singapore/sin...bankruptcy

[CityFarmer]

The impact should be minimum, with a claim of less than 2 mil...

Hin Leong prepares lawsuit against unit of bankrupt ship fuel trader OW Bunker: Court documents

SINGAPORE — Singapore’s Hin Leong Trading is preparing a lawsuit against the Singapore unit of bankrupt Danish ship fuel trader OW Bunker, court documents showed.

Hin Leong Trading, Singapore’s biggest independent oil trader, is preparing a Writ of Summons, which is a court document used to commence legal proceedings in Singapore.

The trader is seeking S$1.67 million from OW Bunker East, a subsidiary of OW Bunker, over the sale of goods, according to the court document.

OW Bunker filed for bankruptcy last week. Calls to OW Bunker East’s offices in Singapore went unanswered. REUTERS
http://www.todayonline.com/singapore/sin...-ow-bunker