Citigroup Seeks 'New Blood' for Asian Commodity Team

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31 Aug 2009

Citigroup Inc. plans to expand its commodity team in Asia at a “double-digit” pace in a bid to capitalize on rising demand for raw materials as the global economic recovery boosts metals and energy prices. The New York-based bank, which has 22 commodity staff in Asia from three in 2005, plans to focus on new products in coal, gas, freight and emissions, Ananth Doraswamy, regional head of commodities, said in an interview from Singapore. “Because everybody is expanding in commodities, you want new blood.”
Citigroup joins Societe Generale SA and Barclays Plc in beefing up commodity businesses as copper, oil and sugar have led a 12 percent jump this year in the Reuters/Jefferies CRB Index, which tracks commodity prices. The expansion of commodities trading boosted Citigroup revenues, Doraswamy said.
“In the next two years, it’s going to be a commodities world,” Ellison Chu, metals manager in Hong Hong for Standard Bank Asia Ltd., said today by phone. “Since the industry is expanding, the tighter pool means higher pay for talent.”
Citigroup hired Ted Huang as director in commodities marketing and origination for Asia, according to an e-mailed statement last week. Huang, who joined from JPMorgan Chase & Co., will focus on energy derivatives and commodities, it said.
‘More People’  “Asia will be the biggest contributor to growth in commodity consumption,” Doraswamy said on Aug. 28. “We will need more people in energy trading and metal sales, as well as agricultural products.”
The U.S. economy shrank at a 1 percent annual rate in the second quarter, less than the decline projected by economists, adding to signs the world’s largest economy is recovering from the worst recession since the 1930s. China, the world’s largest metals user, expanded 7.9 percent in the second quarter, the first time growth accelerated in more than two years.
“The growth we’ve seen is real, I think the government stimulus packages across the globe are working,” Doraswamy said. “I would have been concerned if there had been inflation but inflation numbers are pretty tame, so there’s no reason for governments to worry about the economy overheating.”
Crude oil has advanced 64 percent this year to $73.11 a barrel on the New York Mercantile Exchange as countries worldwide spent more than $2 trillion to spur their economies. The LMEX London Metals Index of six industrial metals including copper and nickel has soared 72 percent in 2009.
‘Region’s Upturn’  “I don’t believe it will stop,” Doraswamy said, adding that oil and base metals may advance further as demand from Asian countries, including infrastructure projects in China and India, supported price gains. “Aggressive monetary and fiscal policies across Asia and strengthening momentum in China are supporting the region’s upturn.”
Citigroup, the third-largest bank after Bank of America Corp. and JPMorgan Chase, has about 300 commodity staff globally, 10 times more than four years ago, said Doraswamy, who moved to Singapore in 2005 after 10 years with the bank’s interest rate derivatives group in New York.
“We expect double-digit growth in our commodity business over the next few years,” he said. The “commodity business is doing well. It has been a meaningful contributor to Citi’s overall revenues.”
Citigroup reported second-quarter profit of $4.28 billion, less than analysts estimated, as loan losses cut into a gain from selling control of the Smith Barney brokerage unit. That compared with a loss of $2.5 billion a year ago.
“China almost doubled its consumption of oil in the last 10 years,” Doraswamy said. “There has also been strong demand in India and Korea. China currently dominates the use of industrial metals. These usage trends are not going to change.”

Source: Bloomberg