China Merchants Energy Shipping (CMES) said has agreed to take full control of a Singapore-based bunker trader in a transaction with a sister company.
The moved is aimed at ensuring fuel supply for the Shanghai-listed company, one of the world’s largest VLCC and VLOC owners, and reduce the number of intra-group transactions.
CMES said in an exchange filing that it would acquire China Merchants Hoi Tung Trading’s 70% stake in China Merchants Energy Trading (Singapore) for $16m.
“After this deal, China Merchants Energy Trading will become a wholly owned subsidiary. This will help ensure the supply of bunker fuel and other petroleum products to us,” CMES said.
“Moreover, this can effectively reduce the number of transactions within China Merchants Group [CMG].”
CMES and Hoi Tung are both ultimately controlled by state-owned CMG, which has been carrying out several rounds of internal restructuring to improve efficiency amid business expansion in recent years.
Established by CMES and Hoi Tung in 2016, China Merchants Energy Trading has been supplying marine fuel to CMG’s extensive shipping interests.
When the offshoot was founded, CMES told TradeWinds that a centralised and professional fuel requisition platform would help reduce costs and act as a buffer against the risks associated with fluctuating bunker costs.
“We picked Singapore because of our strong internal requirements. All our VLOCs and 70% of our tankers pass by Singapore so it is a regular bunker stop for us,” said Xie Chunlin, who was then CMES’ president and chief executive. Xie later became chairman.
The subsidiary is understood to be involved in trading rather than physical delivery, having not acquired a supply license from Maritime and Port Authority of Singapore.
Audited results showed it made net profits of $498,500 on revenues of $348m in 2019.
As of the end of December, net assets of China Merchants Energy Trading reached nearly $22m.
