Singaporean oil broker Hin Leong bankrupt exposes banks

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The company epitomized Singapore’s success in the commodity business. But the oil broker Hin Leong has just gone bankrupt, victim of coronavirus and management, to say the least, opaque.

A society born at the time of Singapore’s independence collapsed under the shock of the coronavirus. Hin Leong was a family company, not an oil trading giant like Vitol or Trafigura, but still one of the biggest Asian companies distributing petroleum products, in particular “bunkering”, to refuel the holds of ships. This activity had transformed the city-state into a major stopover then into a veritable “hub” of raw materials. The founder Lim Hoon Kuin was a billionaire, he was nicknamed OK Lim or the “Singapore wolf”.

Fraudulent practices on hydrocarbon stocks

But the company was unreasonably speculating on the price of hydrocarbons. The system has held up for years. He cracked with the appearance of the coronavirus and the plunge in crude prices. The margin calls were getting colossal. The bankruptcy forced the new director, son of the founder, to confess $ 800 million in losses, hidden in the accounts. An investigation is underway for fraud, Hin Leong sold the same physical stocks several times to obtain new bank financing.

A slate in European banks

Banks will have to pay off a huge debt, $ 4 billion, loaned including by European financial institutions: HSBC, Societe Generale, Natixis or Crédit Agricole. ” All banks that finance raw materials are involved, underlines Jean-François Lambert, consultant in risk management in this sector. They will have to be more demanding with companies and audit firms. Three major bankruptcies in Singapore in less than two years, Coastal Oil, Agritrade and Hin Leong, that’s a lot. And Dubai traders may in turn hold surprises.

The weaknesses are revealed in the crises, of real estate in 2008, with the Kerviel affair, of oil today, judge Alexandre Baradez, analyst at IG. Hin Leong’s fraud was a bet that would never have been discovered if the barrel had remained above 50 dollars


Rice trade normalizes, but purchasing power in Africa worries

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After Vietnam, India has resumed its rice exports. A relief for the African importing countries, struck in their turn by the coronavirus.

The rice trade, very disrupted since the end of March by the coronavirus, is normalizing. India has just re-authorized its exports two weeks after stopping them. The pace is still a bit slower, as the epidemic has wreaked havoc on husking and transporting rice to ports. But Indian rice is returning to the world market, as is Vietnamese rice, even if it is subject to an export quota.

Price lull

This somewhat relieves the pressure on Thai rice which was almost the only one that could be exported, which had propelled the price of 5% broken rice to almost 600 dollars per ton, an increase of 30%. Since then, prices have fallen below $ 550, and other origins remain well below these levels.

Half-hearted satisfaction for African importing countries. Approaching Ramadan, where food consumption is increasing, there has been no panic purchase of rice anywhere in the world, let alone in Africa. This prevented an outbreak similar to that of 2008.

Imports in sharp decline in Nigeria

On the contrary, some countries have reduced their rice imports. Within a month, the United States Department of Agriculture Agency, USDA, cut imports from Côte d’Ivoire by 100,000 tonnes and imports from Nigeria by 300,000 tonnes. The West African giant is expected to import 33% less rice than last year, its lowest level of purchases since 1999, according to the USDA.

Towards a demand crisis linked to the coronavirus ?

With the spread of the coronavirus which is now preventing the African population from earning a living as before, it is the decline in rice consumption that could lead to a food crisis, not the disturbances on the world market. ” There’s enough rice, it’s not a supply crisis, underlines Patricio Mendez del Vilar, CIRAD economist. The crisis may come rather from demand in African countries, which are asking the question of their purchasing power in the weeks and months to come


The price of American oil in negative territory, unheard of

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It’s historic, American oil lost 306% on Monday, April 20 on the New York Stock Exchange. Until it ends up below zero, at -37.63 dollars a barrel! An unprecedented stock market phenomenon. Specific, for the time being, to American oil.

The price of American oil went into negative territory this Monday, April 20, it means that the sellers on the New York Stock Exchange paid their buyers, to get rid of their contracts! A barrel at -37.63 dollars is unheard of in the history of WTI, the American light oil.

New York due date

Monday 20 was, it should be noted, a special day, it was the day on which the closest contract, that of the American oil deliverable in May, expired on the American Stock Exchange. However, at that time, it became impossible to take delivery of the oil in the United States.

The tanks are full, and particularly at Cushing, the delivery point in the state of Oklahoma which is attached to the futures contract, and which is fully saturated, since the Covid-19 epidemic paralyzed transport and therefore refining activity. The phenomenon is global, but particularly accentuated in the United States, which has become the world’s largest producer, where we are forced to store oil in oil pipelines!

Brent floats

This explains the gap with Brent, which has not experienced such a plunge in London. Brent, which is the oil of the North Sea and especially the world reference from which are calculated the prices of the barrels of the other regions of the world, including the oil of the Middle East and Africa, certainly lost 6% this Monday, but it’s still worth just over $ 26 a barrel.

The scheduled delivery in June is further away. This leaves a little more time to sell the crude oil and there are more outlets.

What will Donald Trump do?

Similarly, the new US oil contract, also available in June, was still worth just over $ 20 on Monday. But panic could repeat itself in the same way at maturity.

Until then, the same question remains: what will the Trump administration decide, taxes or even quotas? There too it would be unprecedented, to stop the carnage in the American oil sector. Halliburton, the oil services giant, has just announced a billion dollars in losses.


Oil and the environment: is coronavirus a game-changer?

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The petroleum crisis caused by the Covid-19 epidemic could have serious environmental consequences. A positive or negative impact depending on the strategies of producer states and oil companies.

The interruption of land and air transport in many states confined to the coronavirus suddenly made the atmosphere more breathable. Everyone can make this observation. But the crisis in the oil sector could also lead to more pollution, if the states do not tighten their laws.

A new oil spill in the Gulf of Mexico ten years later?

A significant risk in the United States, according to environmentalists. Ten years to the day after the BP platform exploded, which caused the worst oil spill in the Gulf of Mexico, the Oceana report, published last Tuesday, believes that the risk of accident is greater today than in 2010.

The Trump administration has unraveled the tighter regulations that its predecessor Barack Obama imposed after the disaster, even allowing sea drilling off other protected coasts. With the financial crisis facing many companies in the petroleum sector, the pressure will increase on labor and deadlines, which could lead to new accidents.

Canada Urges Oil Industry To Rehabilitate Landscapes

On the contrary, Canada is taking steps to have the oil sector repair its environmental damage. The Ottawa administration allocates the equivalent of $ 1.2 billion to companies not to produce, but to rehabilitate the hundreds of sites where oil wells have been abandoned, leaving the landscapes devastated in Alberta or elsewhere. Saskatchewan, with a risk of contamination of groundwater.

It’s good for the environment, commented on Prime Minister Justin Trudeau, but also for the owners “, Often farmers wondering how to exploit their land again,” and for 10,000 employees “Of the oil industry that this rehabilitation” will keep in employment

Shell promises carbon neutrality

Another surprise is the commitment of the oil company Shell. The Anglo-Dutch major chooses the worst moment, that of a historic plunge in both prices and its market value, to promise a more proactive reduction of its CO2 emissions (minus 30% instead of 20% in 2030, minus 65% in 2050 instead of 50%) and commit to carbon neutrality by 2050 at the latest.

The CEO of Shell has yet to say how he will get there. The brake on oil activity could help it. Meanwhile, its promise receives a favorable reception from the investors of Climate Action 100+.

Our selection on SARS-CoV-2 coronavirus


Peru: is mining activity threatened by coronavirus?

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One of Peru’s largest copper mines suspended all activities on Monday, April 13. The mining industry, the country’s main economic activity with 60% of exports and 10% of GDP, has been idling for a month due to the epidemic of Coronavirus.

Second world producer of copper and silver, 6th in gold according to Osinergmin, (link in Spanish), Peru has made the mining industry its main economic activity. So when the pandemic arrived in Peru and the government put in place drastic containment measures on March 16, resulting in an almost total cessation of economic activities, the mines were spared and allowed to continue their activities.

However, they operate today in slow motion, as Arthur Morenas, coordinator of the Institute of the Americas in Lima explains: ” Mining activities have been allowed to continue, but they are subject to a number of relatively strict rules that have pushed companies to limit themselves to maintenance operations. There is also the problem of limiting interprovincial transport, as well as cases of contamination in a business that have led to suspension of activity.

Fear of falling prices

Indeed, last Monday, the large Antamina copper mine, nestled in the Peruvian Andes, announced a strategic shutdown for two weeks after one of its employees was diagnosed with coronavirus. As early as March, the company MMG, owner of Las Bambas, one of the largest copper mines in the world, located in the south-east of Peru, had announced that it would not meet its targets this year and dismissed close 2,000 workers at home.

If the impact of this slowdown in mining activity on the Peruvian economy is difficult to predict, according to Arthur Morenas, the fall in prices is the main fear since it is estimated that a 10% decrease in the price of copper per example would reduce Peruvian GDP by 1%. However, the simultaneous decline in supply and demand prevents metal prices from plunging. In addition, Peru is a major producer of gold and silver, safe havens in times of crisis, which could allow it to offset these losses.

In addition, players in the mining industry are counting on the competitiveness of the mine in Peru, whose production costs are the lowest in the world, to withstand the current crisis.

► Also to listen : In Peru, the fight of a valley against the mine


Senegal imports rice for distribution to the poorest households

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In Senegal, 139,000 tonnes of rice for the poorest households will be distributed in the coming days. A response to the economic consequences linked to the pandemic in the country. Tons of rice were massively imported, as the country was not self-sufficient.

from our correspondent in Dakar,

Hundreds of bags of rice on trucks … All will be delivered to around one million households, which represents the poorest 8 million Senegalese. This rice arrived by sea at the port of Dakar and was received by President Macky Sall himself.

A massive import: in the emergency plan, only 900 tonnes of local rice were provisioned. In other words, only one grain in 100 comes from Senegal in this ambitious food aid program.

Four importers shared the market for around 27 billion CFA francs, more than 40 million euros according to the award notice. An import which reveals the weakness of the rice sector in Senegal.

Rice growing, however ancient. Authorities have often sought to energize it. In 2014 Macky Sall set up a subsidy program to mechanize production.

Nothing to do, electoral promise, self-sufficiency in rice is still not a reality. Local production is stagnating at around one million tonnes per year… far from the target of the 1,600,000 tonnes required to have a Thiéboudiene – the national dish accompanied by cereals – 100% Senegalese.

This large order to external suppliers at the time of the pandemic is a reminder, explains Alioune Fall director of the Senegalese Institute for Agricultural Research

The most urgent, say connoisseurs of the industry, is to encourage a little more the purchase of local rice by consumers who too often turn to imported bags. Teaching, the only way to encourage production in Senegal.


Vietnamese rice: country eases export ban

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In Vietnam, after having decided to ban rice exports until the end of May to guarantee its food security, the country finally partially reversed its decision allowing the sale abroad of 400,000 tonnes this month. The explanations of our correspondent on site in Ho Chi Minh City.

This is a compromise decision for the Vietnamese Prime Minister … a partial and temporary lifting of the blockage of rice exports to address the concerns of rice farmers in particular. Producers already hard hit by a historic drought that has hit the Mekong Delta in recent months, aggravated by the commissioning of dams upstream of the river, in China and Laos.

While the government’s decision to limit exports was good news for the working poor because it helped drive prices down on the domestic market, it risked negatively impacting producers, depriving them of outlets for their products.

The authorities also feared that an outright export ban would permanently damage the country’s credibility as a reliable supplier of rice.

The government therefore decided to drop ballast. It again authorizes exports but by imposing quotas. At the same time, it continues to build up reserves to ensure that it can feed its 97 million inhabitants.

On the virus side, if the country is currently relatively spared from the epidemic and has no deaths, the so-called “social distancing” program, started on March 31, is starting to weigh on the economy. Many small businesses have had to close and fire their staff, putting whole families in trouble. To help the most vulnerable, such as street vendors, the government has set up free rice distributions in the country’s largest cities.

Internationally, in the short term, the country – the world’s third largest exporter after India and Thailand – should maintain its export quota policy. The Vietnamese government will make its next decision on April 25. Meanwhile, the world rice market is expected to continue to fluctuate. It will also depend on the drought. According to some experts, if it were to last until June, it could have a significant impact, jeopardizing supply on the world market.


Venezuela: fuel shortage for the world’s largest oil reserve

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Venezuela is running out of gas. The price of a barrel of oil is at its lowest, the country has the largest known reserves in the world and yet its petrol stations are dry. If the very serious economic crisis coupled with the global coronavirus crisis have a lot to do with it, it is above all the American sanctions that prevent Venezuelans from refueling.

How can a country overflowing with oil run out of gas? Well, because oil and petrol are not necessarily synonymous. To have gas you have to be able to refine the crude oil extracted from the reserves and this is precisely what Venezuela can no longer do.

This is obviously due to the very serious economic crisis that Venezuela has been going through for the past seven years. Undermined by mismanagement and corruption, the state-owned oil company PDVSA has seen its production melt and its infrastructure deteriorate over the years. From more than three million barrels a decade ago, the country produces more than about 700,000 barrels today. And the successive closings of refinery sites only allow to treat 100,000 barrels against more than a million previously, if the country can import the products necessary for the process.

So not only must Venezuela import these products, but it must also import gasoline because the Venezuelans’ consumption is much higher than its current production capacity. And it’s getting harder and harder according to economist Luis Vicente Leon, especially in today’s environment. ” First, there are the US sanctions which make it difficult for the government to find suppliers ready to deliver gasoline. But there is also for the State, because of the pandemic, a cash crisis which simply prevents it from being able to pay for this fuel. “

As a result, the gas stations are empty and this should continue since the drop in oil prices, rather than being a boon, reduces Venezuela’s revenues. And the United States, despite a United Nations appeal, does not seem ready to lift sanctions that have targeted PDVSA in particular since January 2019.

Stuck, the government of Nicolas Maduro had no other choice but to decree a gas rationing plan: while the queues extend for kilometers, it is the soldiers who are supposed to ensure the distribution to essential sectors of the economy and health.


Disappointed by OPEC +, oil markets await G20 meeting

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OPEC member countries and their allies including Russia have announced a reduction in their oil production by 10 million barrels per day. An effort on an unprecedented scale, but deemed insufficient by the oil markets.

The OPEC + meeting was extraordinary in every way. First videoconference of the Ministers of Energy, in a context of global containment, facing the coronavirus, it continued late at night from Thursday to Friday to achieve the greatest reduction in production of the history of this alliance of exporting countries: -10 million barrels per day, or 10% of the world supply, half of which is granted by Saudi Arabia and Russia. For the record, OPEC + had never exceeded 2 million 200,000 barrels per day of collective reduction.

Price jump of 11% then decline

However, the oil markets were disappointed by this announcement. Oil prices plunged back below 32 dollars a barrel, after having jumped 11% during the session Thursday and exceeded 36 dollars. An OPEC source first announced that a reduction of 20 million barrels per day was possible. Which roughly corresponded to the current oil surplus. In the end, therefore, it is a reduction of half the supply that is made. Markets doubt that it will be enough to wipe out all the oil that the coronavirus epidemic has rendered useless, since transport is largely interrupted all over the planet.

Mexico refusal

In addition, the alliance between the 13 OPEC countries, led de facto by Saudi Arabia, and the 10 non-OPEC countries, led by Russia, which had invited a dozen other countries to participate, including Norway , Brazil, Canada, failed to sign a final agreement, because, officially, of Mexico, which would have refused to reduce its production by 10%.

Purchasing strategic reserves?

Now all hopes lie in the meeting of G20 energy ministers this Friday. This time consumer countries, members of the International Energy Agency, will be associated. And so is the United States, which is also the world’s largest producer of oil today. Russia demanded that the United States participate in the joint reduction effort. Washington considered the reduction in production caused by the fall in world prices sufficient.

Another solution will be addressed during this G20: coordinated purchases of crude oil for the strategic reserves of consuming countries.


Coronavirus boils the global coffee industry

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To limit the spread of covid-19, the Kenyan authorities have asked the Nairobi coffee exchange to stop its auction. One of the multiple disturbances caused by the coronavirus to the entire world coffee sector.

The Nairobi coffee exchange interrupted its electronic auctions during the session on March 31. Kenyan authorities’ decision to stop the spread of the virus. Since then, the 700,000 producers have been worried about the marketing of their harvest, the country’s third source of export income.

Kenyan coffee is a high-end arabica primarily intended for artisan roasters in Europe and the United States. A niche market, less than 900,000 60-kilo bags shipped each year.

Honduras confined to full coffee harvest

The impact is therefore more local, in Kenya, than international. The world’s coffee industry is nonetheless undergoing major disruption because of the coronavirus. Honduras, the world’s fourth largest exporter, has been forced to contain 15 days in the middle of the harvest, as has Peru.

In India, shipments of coffee are desperately waiting for an administration stamp to leave the port of Bangalore. Containers still blocked in China are missing, boats cancel stopovers in Le Havre and do not deliver coffee in due time. And this while consumers have run for coffee in stores. The fear of missing out before being confined to your home. ” The soufflé has dropped a bit, but in France, everyone bought their weight in coffee “Quips a merchant.

Fear for Brazil which has not taken preventive measures

This has prompted the large roasters that supply large retailers to be a month ahead of their grain purchases. Will this short-term frenzy compensate for the collapse in out-of-home coffee consumption, since bars, restaurants and hotels have closed? Not sure. Arabica prices have already fallen after a strong rebound since late February.

What is certain is that the entire coffee industry must adapt hourly to incessant disturbances. The great fear for the coming months is that Brazil, which will enter the harvest, the largest in its history, will lack containers, or be faced with a major health crisis, since no preventive measure has been taken. taken by the government of Jair Bolsonaro.