Could you introduce Kempar Energy to our audience?

Kempar Energy was born 12 years ago out of a vision to start an independent trading company specialized in large-scale chemical commodities. Among the big trading players from China, Korea, Thailand, Japan and Europe that were mostly focused on polymers, agrochemicals and specialty chemicals we found a gap for a niche, SME trader in the bulk liquid Indian market. At that point in time, Indian demand was met by large international traders, but over the years, these gradually focused more on upstream, big volume trading of crude, naphtha, benzene and paraxylene. This created a vacuum for lower-volume trading in aromatics and solvents; a space we successfully occupied. Today, we are working together rather than in competition with big trading houses like Trafigura or Reliance, who are either clients or suppliers.

Could you share more details about your footprint in different markets and products?

Kempar’s presence is Asian-centric. We buy liquid petrochemicals from Singapore, Malaysia, Thailand, Korea, China, Taiwan and Japan (and sometimes also from India, the US, and Europe), and sell mostly in India – 70% of our volumes go to the Indian market, and the remaining to Southeast Asia and the Middle East. Product-wise, we have a well-defined portfolio of up to 10 commodities, including toluene, xylene, benzenes and benzene derivatives, as well as gasoline components like Pygas. Trading at a capacity of 600,000 t/y, we closed 2021 with a revenue of US$350 million and we expect to reach up to US$400 million this year. Last year we increased our trading volumes from 400,000 t (in 2020) to 600,000 t, which coincided with a top line of US$350 million.

Why did Kempar Energy choose Singapore as an operational base?

After considering other candidates like Dubai, Hong Kong and London, we chose Singapore because of the geographical proximity to the Indian market, as well as the maturity of trading infrastructure - with a rich community of traders and brokers, a well-established financing ecosystem, and unparalleled business networks.

Could you help our audience better understand the financial environment for traders in Singapore?

After the pandemic and the commodity crash in 2020, a lot of the traditional commodity financing banks either pulled out or became increasingly risk-adverse, to the extent they would only finance the “big boys” of trading like Trafigura, Glencore or Vitol. The past few years have been tough for traders without a very large paid-up capital and a strong track record. In this environment, new players do not stand a chance. If I had to start Kempar Energy today with the resources I did 10 years ago, it would be a lot more difficult to get a loan signed off. The selectiveness of the financing environment has both positives and negatives: On the one hand, it filters out potentially faulty new businesses; on the other, it clamps down on budding entrepreneurs.

How is Singapore handling the disruptions in global supply chains?

There has been a lot of uncertainty caused by the pandemic and the crisis in Ukraine, and freight rates and shipping bunkers prices have gone up massively; but, in Singapore, we have cargoes loaded out of the island or coming into the island, without any issues. Other than the uncertainty hovering over the entire supply chain, operations have been smooth and activity continues uninterrupted.

What is your outlook on the price of aromatics and solvents?

It’s difficult not to be bullish, but of course, the outlook depends not only on supply and demand, but also on geopolitics – and this makes everything very uncertain. We have entered a phase where there is a huge demand push; as the world is opening up, people meet up again, they travel again, while construction and infrastructure projects are in full flow at a super pace. Looking at supply dynamics, chemical producers suffer from very squeezed margins, which constrains production. The naphtha crackers and Pygas crackers in the region are not running at full capacity, and we see situations of force majeures and plants shutting down. With both beefed-up demand and constrained production, prices can only stay high. Until the crisis in the upstream is resolved so that it becomes economic for producers to resume capacity, I don’t see how prices could cool off. At least for Q3 and Q4 of this year, I remain bullish on prices.