"The proprietary blend business represents a substantial amount of our revenue today and is a central focus for our business going forward."

Kelvin Sim

CEO, ABSOTECH

November 18, 2022

Absotech was created in 2002. Could you bring us up to date with the company’s evolution?

Like most traders, our traditional business has been to buy and sell in bulk, making modest margins. In this part of the business, we leverage our know-how, our inventories, and long-term relationships with regular customers to offer them more stability of supply, especially when prices shoot up. However, this model is often unsustainable, as the collapse of giants like Hin Leong Trading and Ocean Tankers, once two of Asia’s largest oil trading and shipping firms, proved.

Back in 2008, I began developing the business in solvent trading: We buy butyl cellosolve or butyl glycol, as well as their by-products to do a proprietary blend formulation, which we ship into different industries, including O&G, construction and agriculture. Because the prices are stable and the contracts are typically at less than three months, this business is quite balanced, with substantial margins to cover periods of inflation. The proprietary blend business represents a substantial amount of our revenue today and is a central focus for our business going forward. In Singapore, Absotech is among the more reliable companies offering this service, and the entry barriers for potential competitors are very high, which gives us an element of exclusivity.

What is Absotech’s current footprint and what are your expansion plans?

Our priority is Asia Pacific simply because this territory is the most efficient in terms of our supply chain. We would like to expand with a second operation outside of Singapore, because, ironically, once we will grow by 30-50% in Singapore, our compliance costs will grow, which will actually hinder our growth. We decided on Malaysia, looking at the southern state of Johor, because this is only an hour away from Singapore, and our staff, many of whom are Malaysian, will be more than glad to be based there. Thirdly, Malaysia gives us direct access to raw materials from Petronas.

In terms of our long-haul business, Covid has severely impacted operations. The long haul used to represent about at least 15% of our total sales, but this shrunk down to zero during the pandemic and is now growing slowly back to about 5%.

Absotech also operates LNG affiliate AbsoEnergy, could you tell us about this part of your business?

AbsoEnergy is focused on small-scale LNG. AbsoEnergy started in 2018 when Pavilion Energy partnered with us in a project to showcase the potential of small-scale LNG bunkering. We are probably the first company in Southeast Asia to have a 40-footer T75 ISO tank filled with LNG to supply to China to Sinochem. However, it is difficult for Singaporeans to add value to Chinese markets.

Our focus is Southeast Asia, but the sustainability platform, including LNG, is not very mature here yet. One of the countries where we could drive this business is Vietnam, a market with many projects in the pipeline, and because these are usually small we can add value, not many people being able to get a small vessel of 30,000 m3. In Vietnam, I am also interested to ship ISO tanks from the Hainan side to the Haiphong side in the north. Expansion in Vietnam is contingent on the pandemic and obtaining the necessary approvals.

What are the biggest challenges you confront today as a result of the pandemic?

Although we face a period of heightened instability, this is one of the best times to ramp up our margins. One challenge, however, is the cost of shipping.

Secondly, hiring the right people is one of the biggest challenges we face. After two years of being stuck in Singapore, we allowed our foreign workers to go to their home countries for extended periods. During periods of high infection rates, blue-collar workers are a scarcity.

Could you share your vision?

My vision for Absotech is to be sustainable in the long-term and evolve with new developments every 5 to 10 years as we have done first by introducing the solvent trading distribution, then the proprietary blend, and, hopefully, further supplementing our growth with the small-scale LNG.

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