* More than 100 metals, minerals traders have set up in
* China traders eyeing M&A opportunities to secure metal
* Hiring top talent, including from miners, merchants
By Melanie Burton
SYDNEY, Aug 15 Chinese metals traders have
opened offices and hired top talent in the Asian financial hub
of Singapore over the past year, aiming to capture opportunities
created by the exit of a string of Western banks from the global
commodities trading business.
China has long sought more pricing power in commodities as
it is the largest consumer of many resources, including copper
and iron ore, but does not produce enough and must import at
global prices. Mainland firms are now aiming to cut out
middlemen and connect with a wider array of producers and users.
As Western banks have ditched their commodities divisions
due to mounting regulatory costs after the financial crisis,
Chinese trading firms have seized the chance to build their
trading muscle in the international hub right at their doorstep.
Chinese firms backed by sprawling metals conglomerates,
including top mainland trading house Maike Metals Group, are
among those that have set up a base in Singapore.
Awin Resource International Pte Ltd, owned by a Chinese
billionaire, and Kyen Resources, backed by four mainland firms
active in the metals industry, have launched offices in the
city-state over the past one year.
While the Chinese metals trading firms in Singapore will
face stiff competition from established traders such as Glencore
and Trafigura, analysts expect them to be
able to profit from their mainland connections.
The firms will be able to procure for themselves and exploit
pricing gaps between China and global markets. They will also be
able to use their homeground advantage to connect Chinese buyers
with sellers in South East Asia and other regions, financed by
banks in Singapore.
"There are some significant Chinese traders, and they're
definitely moving more of their business overseas. They have
size and capital to compete, certainly versus regional players,"
said Ivan Szpakowski, Citi commodities strategist in Shanghai.
The Chinese firms are looking beyond the staple arbitrage
trades that rely on interest rate differentials, leveraging
instead their shareholder heft to build their business. And they
have hired specialist physical metal traders for the purpose.
Awin, for instance, has taken on former Xstrata employees
Felipe Williams, who is now Awin's head of base metals, and
Javier Gausachs as head of mergers and acquisitions. It has also
hired a senior trader from Louis Dreyfus.
A unit of Amer International Group, Awin now has 30 staff in
Singapore compared to just one a year ago. Amer is owned by Wang
Wenyin, one of the 20 wealthiest people in China with a net
worth of around $5 billion, according to Forbes.
The firm is targeting growth through acquisitions,
particularly to build its copper supply, a person familiar with
the matter said. The company declined to comment.
Maike, which has annual sales of 83 billion yuan ($13.39
billion), is ramping up its activities in Singapore, two sources
said. Its joint venture with China's third-largest copper
producer, Jinchuan Group, was set up there last year.
Maike did not respond to requests for comment.
GT Metals & Investment, backed by copper product maker
Jiangsu Jinhui Group, launched its business in the city-state
late last year.
NEW COMMODITIES LANDSCAPE
The Chinese metals trading boost in Singapore comes as the
global commodities trade is being transformed, with easy credit
drying up and trade houses benefitting from lighter regulation
and lower capital-holding requirements compared to banks.
Credit Suisse last month became the latest major
bank to wind down its commodities trading.
Besides metals, China has also sought to build trading heft
in agriculture. Chinese trader COFCO Corp earlier this year
bought majority stakes in Dutch grains trader Nidera and Noble
Group Ltd's agriculture businesses.
A big draw for commodities firms in Singapore is what
executives at these firms say are generous tax concessions
offered on a case-by-case basis by the government, as well as
the presence of major banks, producers such as BHP Billiton
and local legal firms that facilitate trading.
From just a handful five years ago, metals and mineral
traders based in the city-state have grown to more than 100 now,
Satvinder Singh, Assistant Chief Executive Officer of government
agency International Enterprise Singapore, told Reuters.
"There are a lot of opportunities within the region that
would be very interesting for smaller, more nimble outfits to
profit from," said Mark Keenan, analyst at Societe Generale in
($1 = 6.1982 Chinese Yuan)
(1 US dollar = 1.2525 Singapore dollar)
(Editing by Muralikumar Anantharaman)