Singapore oil trader Zenrock faces court action: Update
Adds details throughout
UK-based bank HSBC has filed a court application to place Singapore-based trading firm Zenrock Commodities under judicial management, piling further pressure on the city-state's oil trading sector following the collapse of counterpart Hin Leong last month.
The application was made on 4 May, according to a copy of the case details seen by Argus. Judicial management is a form of debt restructuring.
The reason for the filing and impact on Zenrock's physical trading operations is unclear. Zenrock and HSBC did not reply to requests for comment.
Zenrock traded over 15mn t of products in 2019, according to its website. It mainly trades oil products, particularly middle distillates, but also has a presence in crude and petrochemical markets.
Zenrock has scaled back its middle distillates trading in recent weeks. It was last active in the Singapore afternoon trading session on 17 April, when it offered to sell 10ppm (0.001pc) sulphur gasoil. It not been in the online jet fuel trading session since 4 March. Zenrock last sold two 25,000t (197,000 bl) jet fuel cargoes to state-controlled China Aviation Oil for February and March delivery.
Singapore's gasoil and jet fuel trading activity has fallen because of the Covid-19 pandemic, which could limit any impact should Zenrock pull back from the market.
Zenrock is also active in the Singapore ex-wharf and cargo markets for 0.5pc sulphur marine fuel. The company buys fuel oil cargoes in Singapore and ships them to China's bunker market. It agreed a deal with the marine construction unit of state-owned China Communications Construction (CCCC) in September 2018 to supply marine fuel to CCCC's more than 200 construction vessels.
The company has a more limited presence in the crude market, where it is involved in supplying cargoes, including Russian ESPO Blend, to Chinese independent refiners. It also has petrochemical operations, including trading paraxylene swaps on the Singapore Exchange and physical cargoes of gasoline blendstock MTBE.
Zenrock's strong links to China reflect the experience of some its leading executives. Its president Xie Chun previously worked at state-controlled Unipec, the trading arm of China's largest refiner by capacity Sinopec. Its executive director Tony Lin spent 17 years at trading firm Vitol, including a stint heading the company's Beijing office. Zenrock was founded in 2014.
Zenrock's problems are the latest blow to Singapore's trading sector following the collapse of Hin Leong, which filed for court protection last month with net liabilities of over $3bn.
The Monetary Authority of Singapore (MAS) said last month it was watching developments related to Hin Leong and "has reminded banks not to de-risk indiscriminately from the bunkering and oil trading sectors".
MAS separately raised concerns about the potential impact on the refining, storage, petrochemical and finance sectors from "contagion effects" in the event of widespread failures of firms involved in wholesale fuel trading.
Zenrock last month acknowledged it was facing "adverse conditions" because of the impact of slowing demand in China, the Covid-19 pandemic and oversupply of oil. It said it had the ability and experience to work through these issues profitably.
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