– The First Chartered Ship Departed for Guam from the Port of Daesan, Chungcheongnam-do, Korea, on August 31
Hyundai Corporation’s Petroleum & Chemical Products (PC) Division concluded a contract of affreightment (COA) with Nanjing Tanker Corporation, China, on August 19. As a result, it has established a basic framework to supply 7.20 million barrels (about 970,000 tons) of ULSD (Ultra-Low Sulfur Diesel) to the Guam Power Authority (GPA) for the next three years at competitive prices.
▲ Ceremony for the 1st Delivery of ULSD to Guam Held on April 26
■ Contract to Supply ULSD to GPA and Needs for a Long-Term Delivery Agreement
HC’s PC Team One closed a deal with GPA in February this year to supply 7.20 million barrels (about 970,000 tons) of ULSD for power generation for the next three years (+ an option for further two years). The ULSD is expected to be used for the UKUDU combined cycle power plant run by GPA starting in 2025.
GPA has mainly used heavy oil for power plants but has recently shifted to more eco-friendly diesel. Since August, 2013, HC has supplied various grades of heavy oil (HSFO, LSFO, ULSFO, etc.) for power generation to GPA. Pursuant to the existing agreement with GPA, HC still has to supply remaining heavy oil until August 2026. This deal enables HC to supply diesel for the new power plant, as well as the remaining heavy oil, showing its solid partnership with GPA
For the seamless implementation of the new supply agreement, HC was required to sign a COA with a competent shipping company that can deliver diesel from HD Hyundai Oilbank to Guam. However, when concluding the supply deal, the Yemeni civil war led to a sharp rise in shipping costs, preventing HC from entering into a COA and instead, opting for a spot contract for the first oil delivery. In particular, in the case of this diesel supply agreement, HC’s profitability significantly depends on shipping costs, making it extremely important to secure a COA partner that can offer sufficent space at competitive prices.
■ Concluding a COA with Nanjing Tanker Corporation, the Biggest Tanker Company in the Region
▲ The COA Signing Ceremony with Nanjing Tanker Corporation Held on August 19
Mr. Dai Ronghui, General Manager of Nanjing Tanker Corporation, and Cha Myung-keun, Executive Director of Hyundai Corporation’s Petroleum & Chemical Products Division (Front Line)
The PC team chose Nanjing Tanker Corporation as its potential partner. The shipping corporation listed on the Shanghai Stock Exchange is the biggest tanker company in the region owning a total of 74 tankers including 31 medium range (MR) tankers that HC needs for this delivery. As a result, by June, HC had verified its capability through two spot deliveries. Then, after intense negotiations on shipping conditions, it successfully signed a COA with Nanjing Tanker Corporation, establishing a mutual partnership.
This COA will lead six to eight voyages to be taken starting in August, this year. Moreover, upper and lower limits apply to shipping costs, the most significant element of the COA, to prevent the costs from soaring or plummeting due to external variables. PC Team One also announced its plan to expand the supply of its petroleum products to niche markets in the Pacific Rim including Guam, Saipan, and Hawaii through this COA-based partnership with Nanjing Tanker Corporation, the biggest tanker company in Northeast Asia. The team also plans to actively extend value chains by promoting partner-bound bunkering.
■ The First Shipment of ULSD Pursuant to the COA
▲ PR Kang Tae-woong Visiting Shan Gang Fa Xian, the First Vessel of the COA, at the Port of Daesan
On August 30, PR Kang Tae-woong of PC Team One visited the Port of Daesan where oil from HD Hyundai Oilbank was loaded onto Shan Gang Fa Xian, a tanker run by Nanjing Tanker Corporation undertaking the first voyage in accordance with the COA, in order to celebrate her safe entry into the port and to inspect the shipment processes. PR Kang said, “Witnessing 210,000 barrels (28,200 tons) of diesel being loaded onto the 185-meter-long and 32-meter-high tanker reminded me of the importance of our work.”
▲ (Left) Captain Hu Fei and PR Kang Tae-woong Posing for a Photo after the Welcoming Ceremony for the First Vessel of the COA
(Right) HD Hyundai Oilbank Staff and the Ship’s Captain and Crew Holding an On-Board Delivery Management and Safety Meeting
Resolving to honor the agreement for the next three years, PR Kang requested HD Hyundai Oilbank staff, the captain, and crew to spare no effort in producing high-quality oil, managing shipments in a stable manner, and ensuring safe voyages. Captain Hu Fei replied, “I would like to thank you for signing the COA and will do my utmost to ensure safe and speedy shipping using my knowhow accumulated over the past several decades.”
▲ Scene of the First Shipment of the COA (Loading Arm Coupling at the 6th Berth for HD Hyundai Oilbank at the Port of Daesan)
Even though a numbr of geopolitical incidents happening all over the world have recently heightened logistics risks more significantly than ever before, HC’s PC Team One has successfully found an optimal shipping partner and has built a basic framework to supply ULSD to Guam in a stable and safe manner. Backed by this partnership, PC Team One is expected to grow further through the extension of various value chains.