New | China taps Singapore in push to boost pricing power in metals

Chinese metals traders have opened offices and hired top talent in 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. Chinese 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 Singapore.

Chinese firms backed by sprawling metals conglomerates, including top Chinese trading house Maike Metals Group, are among those that have set up a base in Singapore.

Awin Resource International, owned by a Chinese billionaire, and Kyen Resources, backed by four Chinese 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 Chinese 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 home-ground advantage to connect Chinese buyers with sellers in Southeast Asia and other regions, financed by banks in Singapore.