December 20, 2019 / 12:26 PM / a month ago

Mercuria cuts China metals, petchem trading team to reduce risk - sources

BEIJING/SINGAPORE, Dec 20 (Reuters) - Commodity trading giant Mercuria has axed up to a quarter of its Shanghai trading team, including base metal and petrochemical traders, as it looks to reduce the risk in its portfolio, according to three sources with knowledge of the matter.

Around 10 people have left the Geneva-based trading house’s Shanghai office since November, said the sources, who put the previous headcount on the Shanghai team at 40-50. The sources declined to be identified because they were not authorised to speak to the media.

Mercuria did not immediately respond to a request for comment on Friday.

Uncertainty over China’s demand growth for industrial metals has increased risk for traders in a difficult year that has seen the economy cool in the world’s top metals consumer amid a bruising trade war with the United States.

Mercuria’s metal trading operation saw the biggest number of casualties under the Shanghai restructuring, said the sources, who added that two petrochemical traders were also let go. The company’s China oil trading team operates out of Beijing instead of Shanghai.

“Some of the metals business in Shanghai is not making money but is rather capital-intensive and carries relatively high risk,” said a trading executive with knowledge of Mercuria’s restructuring.

“That is why some of the business and staff were being removed so that the resources could be diverted to sectors with higher return,” he added.

Among four or five departures in metals, Mercuria’s physical nickel and aluminium traders have left the Shanghai team, according to the second source, who noted that the company would continue to do paper trading for those metals and still had physical copper, lead and zinc traders.

Benchmark London nickel prices are up around one-third so far in 2019 after a volatile year that saw top nickel ore miner Indonesia expedite a ban on exports. Aluminium , meanwhile, is down around 2.4% year-to-date.

The two Mercuria petrochemical traders handled products such as benzene and paraxylene, said the third source.

The start-up of two mega private refining and chemical plants this year in China has led to a surge in local petrochemical production that has squeezed profit margins for traditional regional exporters such as South Korea and Japan, as well as for traders dealing in these products. (Reporting by Tom Daly and Chen Aizhu, editing by Louise Heavens)

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