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Apeiron finds treasure in used cooking oil

The bio-energy trader's strategy of not competing head-on with the giants in the commodities supply chain is paying off.

Mr Chen is bullish about the future of bio-energy, citing declining costs and a rise in regional demand for clean energy amid oil price swings and worries about the hazards of nuclear energy.

ABOUT to throw away your used cooking oil? Apeiron AgroCommodities wants it.

Well, maybe not in Singapore just yet but certainly in the Middle East, where the bio-energy trader recently teamed up with a unit of Dubai-based conglomerate Lootah Group to collect used cooking oil in the United Arab Emirates. It has also started collecting used cooking oil in Indonesia and aims to start collection in other countries in Asia soon, including the Republic.

Apeiron has set its sights on used cooking oil as a new potential growth area for its trading business, having already carved out a niche in other biofuel platforms, says the firm's co-founder and director Chris Chen in an interview near his office in Clarke Quay. "Instead of it being recycled illegally, we can use it for producing biodiesel. There's a very sustainable angle to this product."

The company buys and sells physical goods such as palm oil-related and soyabean oil-related products that can be turned into biodiesel, a kind of fuel that can be used in diesel engines. Biodiesel is its biggest revenue segment.

It also trades in biomass, a segment that includes supplying wood pellets to be burnt by power plants.

While it is still too early to say if used cooking oil will become one of Apeiron's major business segments, the company is "quite aggressively" looking at this area, Mr Chen says, noting that a recent slowdown in demand from China means greater urgency for the company to expand and diversify into more products within the bio-energy space.

The firm's move to target used cooking oil as a source of bio-energy is part of an overall strategy of not competing head-on with the giants in the commodities supply chain.

As an illustration, in Malaysia or Indonesia, the supply of used cooking oil as a feedstock for biodiesel might be 1,000 tonnes compared with 100,000 tonnes of palm oil as feedstock, Mr Chen says, though he notes that if ever the biodiesel segment grows too lucrative, Apeiron may be acquired by a bigger player.

"We pick our battlefields carefully . . . we try to identify products that are non-mainstream, something that's not worth the big boys' time to look at."

That strategy seems to have paid off so far for the firm, which Mr Chen and business partner Richard Huang started in July 2007 with "zero capital", a makeshift office in Mr Chen's parents' house and virtually no experience in physical commodities trading - let alone the fairly niche area of bio-energy trading. The two were former schoolmates.

"We started exploring areas and identified biodiesels as an industry with good growth potential," Mr Chen recalls. "There was big hype about it (biodiesels) back then, so we thought it would be good to be the first mover."

Luck also smiled on them. "We didn't do much planning, we just thought we'd give it a try. Fortunately we went in at the right time . . . there were pretty volatile price movements. Over 2007 to 2009, prices could move up or down by a few hundred per cent over a few months."

It helped a little that Mr Chen previously worked as a proprietary trader in Manhattan since the fundamentals of trading are pretty much the same, he recounts. But the kind of trading Apeiron engages in is completely different from "facing the computer every day", he says, noting that he now does much more face-to-face meetings with suppliers and clients.


The learning curve was steep. "We did a lot of cold-calling in the beginning . . . learnt almost everything on the job. Apeiron is purely physical, moving products from point A to point B."

The partners started out by looking for suppliers in Asia. Mr Huang worked in the chemicals industry before co-founding Apeiron and had some relevant knowledge, plus fluency in Bahasa Indonesia, something that was to Apeiron's advantage.

Apeiron managed to clinch its first deal, which was between a seller of glycerine in Indonesia and a buyer from China, within just three weeks of inception.

After that, other deals started rolling in via word of mouth.

"We were one of the first few traders to approach some of our suppliers so they could have been more willing to give newcomers a chance. Timing was also important because at that time, the first product was newly traded and supply was scarce."

From that point, the company gradually started to trade more products within the bio-energy space as suppliers became more comfortable with Apeiron and asked it to help source or sell related products, Mr Chen says.

It subsequently branched out into South America, Europe and the Middle East and now has offices in Indonesia, Dubai, South Korea and India. It has six employees in Singapore and slightly less than 30 worldwide. Although it also tried to set up a representative office in Brazil early on, that turned out to be difficult due to the language difference and time zone, so it decided to work with a "trading partner" in that country instead.

While Apeiron's suppliers are mostly in Asia and South America, its buyers are mostly in China and parts of Europe such as Rotterdam, Britain and Spain. It also has customers in India and Africa. Altogether, Apeiron has a presence in 15-20 countries, Mr Chen estimates.

Although the bio-energy trading industry is fragmented, he says the company keeps its edge through customer service - "and, of course, competitive pricing".

"From day one, we realised that trading is quite globalised; you can get bypassed pretty easily and many people can contact suppliers and buyers directly. So value-add is very important, customer service is very important," Mr Chen says.

On the supplier side, "we give them top-notch market info", he adds. Logistics is also key in trading so the firm provides "full-fledged" logistics services.

Maintaining a good reputation in the market is also crucial. "They know that we will never default. Trust and credibility are what will differentiate you from the rest of the market - these are the intangible barriers to entry," he notes.

Apeiron's turnover of S$3.7 million in 2008 had surged to around S$50 million in 2014. However, Mr Chen acknowledges that 2015 has been a tough year, especially in July and August when there was a broad sell-off in commodities.

Cautioning that the company likely cannot achieve the same growth rate of the past eight years, which had come largely on the back of China's economic expansion, Mr Chen says Apeiron has set its sights on integrating upstream and downstream to preserve its rice bowl. "The challenge every trader faces is that we know trading is not forever. A supplier might build a new refinery to treat products that they might otherwise sell us."


The firm is hoping to tender for long-term contracts to supply biomass to power plants in Asia. It also plans to build its own refining facility in South-east Asia so that it can also manufacture biodiesel, and has invested in six to nine-month time charters for chemical tankers for liquid storage.

Mr Chen remains bullish on the future of bio-energy, citing steadily declining costs and an uptick in demand for clean energy in the region amid oil price swings and worries about the hazards of relying on nuclear energy.

The supply of palm oil has also been growing "tremendously" over the past few years, he says. "New plantations the size of Singapore are being developed. For palm, there's only so much that the cooking oil market can absorb, so it has to grow into other areas such as biodiesel."

Some countries in Asia already require biofuel to make up a certain minimum percentage of total fuel and that percentage could grow over the next five years, he says. Indonesia, for instance, mandates a "B10" biodiesel programme that involves a blending rate of 10 per cent palm methyl ester and 90 per cent diesel.

Apeiron, a first-time E50 award winner, is also keeping an eye out for mergers and acquisitions, and a possible listing down the road.