About three years ago, Japanese oil trading company Petro-Diamond Singapore moved to a bigger office in posh Marina Bay as parent Mitsubishi Corp began combining its trading operations in Tokyo with those within the Southeast Asian city.
Once conservative, Petro-Diamond became the world’s top book leader for Mitsubishi’s oil and fuel businesses last yr, tripling its profits and assets from two years ago, in line with interviews with company officials, trade sources and reviews of monetary records. .
Like other trading firms, Petro-Diamond has been eyeing a slice of China’s fast-growing crude import market, first hiring a Chinese trader in November 2018 to handle its oil business with China, sources said.
However, in September, Mitsubishi said the Petro-Diamond trader had lost about 34.2 billion yen ($314 million) after it “repeatedly” engaged in unauthorized trades since January by pretending they “seemed to be hedging transactions.” They reported the matter to the police.
Because it recorded such a big loss, we couldn’t reinvest in the identical company and higher strengthen our management system
The trader, identified as Wang Xingchen, also often called Jack Wang, in an announcement issued through a lawyer denied any wrongdoing, saying he was acting on the orders of his managers and the losses were as a result of “premature” settlement of derivatives positions.
On Wednesday, Mitsubishi announced that it plans to shut the 30-year-old Petro-Diamond company as a result of losses.
Petro-Diamond will likely be liquidated after closing oil and fuel contracts and settling debts, the corporate said on Wednesday, without giving a selected timeframe.
Rogue oil trader causes 34.2 billion yen losses at Mitsubishi’s Singapore unit
Rogue oil trader causes 34.2 billion yen losses at Mitsubishi’s Singapore unit
Mitsubishi will bring a few of its oil and fuel trading back to Tokyo, Chief Financial Officer Kazuyuki Masu said during a news conference on first-half results Wednesday.
Mitsubishi also lowered its full-year net profit forecast to 520 billion yen from 600 billion yen in August.
The case has raised questions on why Petro-Diamond allowed a brand new investor to take large positions, industry sources said.
Chinese students top the list of foreigners working in Japan after graduation
Chinese students top the list of foreigners working in Japan after graduation
Since then, Mitsubishi has tightened risk controls, requiring almost every transaction to be reported to Tokyo, which has slowed Petro-Diamond’s operations, said a second source familiar with the matter.
Although Petro-Diamond is only a small part of a huge trading company, Mitsubishi’s dramatic decision shows that it wants to end the incident and prevent further damage.
The loss joined the list of infamous oil trading collapses. In 1994, Metallgesellschaft AG suffered a loss of $1.2 billion due to the failure of its hedging strategy. In 2004, China Aviation Oil made an infamous $550 million mistake when it ran into conflict over soaring prices.
Petro-Diamond, which ran Mitsubishi’s overseas oil business, was founded in 1989 and trades in petroleum products including crude oil, naphtha, gasoline and fuel oil, according to the company’s website. Mitsubishi also has separate natural gas and metals trading operations in Singapore.
The parent company will continue its overseas oil operations “after reconfirming that its risk management systems are robust and thoroughly enforced, and is taking all possible measures to prevent similar incidents from occurring in the future,” it said.
A company official, who spoke anonymously, lamented Petro-Diamond’s sudden death.
“It took 30 years to achieve this and everything was ruined,” the official said.
