Bloomberg News

Trafigura Following Raffles Into Heart of Asian Trade

May 02, 2012

Jonathan Pegler, the oil director for the Asia-Pacific region at Trafigura Beheer BV. Photographer: Munshi Ahmed/Bloomberg

Jonathan Pegler, the oil director for the Asia-Pacific region at Trafigura Beheer BV. Photographer: Munshi Ahmed/Bloomberg

Staff at Trafigura Group, the third- largest independent oil trader, are getting a real-time snapshot of demand in the top crude and metals-consuming region as they look from their new office onto lines of ships off Singapore.

The Amsterdam-based company moved 30 people in the past year to Singapore to trade metals and bulk commodities. Jonathan Pegler, the oil director for the Asia-Pacific region, came from Geneva in February and is already adding staff to the offices on the 28th and 29th floors of a downtown skyscraper that can seat 250. The group had nine people in the state in 2000.

Trafigura joins companies from BHP Billiton Ltd. (BHP) to Cargill Inc. and Anglo American Plc in adding to the more than 10,000 jobs already linked to offshore trade in commodities and energy in Singapore in 2010, a 40 percent increase from 2006, according to government data. More than 140,000 ships call every year at the port, which straddles trade routes to and from China and India, home to 36 percent of the global population.

“My traders have a new hobby of spotting their tankers and bulk carriers, checking how loaded they are,” said Pegler, standing next to the floor-to-ceiling windows with views over the largest refueling hub for the global fleet of merchant vessels, which carries about 90 percent of world trade. “The markets over here are growing and presenting many new ideas.”

Agricultural Commodities

BHP, the world’s biggest mining company, plans to transfer as many as 90 jobs to Singapore. Cargill, the largest closely held U.S. company, expanded its staff by about 43 percent in five years. Anglo American (AAL), the top platinum producer, chose the country as one of its two main marketing hubs along with London. Mercuria Energy Trading SA will base the head of its global agricultural business in the city.

Asia’s economic expansion drove a more than quadrupling in oil prices and fivefold gain in copper over the past decade. The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 5.2 percent this year, lagging behind the 9.6 percent advance in the MSCI All-Country World Index of equities. Treasuries were little changed, a Bank of America Corp. index shows.

Singapore, about one-quarter the size of Rhode Island, has a population of 5.2 million people and sits on the equator between China and India which have a combined population of about 2.5 billion. The two nations generated a combined gross domestic product of about $7.7 trillion in 2010, up from $2 trillion in 2002, World Bank data show.

Transparency International

Offshore trading in energy, metals and agriculture with international partners was valued at a record $1.02 trillion last year, 46 percent more than in 2010, says International Enterprise Singapore, a government agency. Supertankers carrying 2 million barrels of oil to bulkers able to transport 400,000 tons of iron ore are among ships that visit its port and terminals. Maritime and Port Authority data show vessels arrive or leave the country every three to four minutes.

Singapore, led by Prime Minister Lee Hsien Loong, the son of Lee Kuan Yew, has transformed itself into an Asian financial and commodities hub in the past half century. Gross domestic product has climbed 40-fold to S$299.6 billion ($242.3 billion) at 2005 market prices, government data show.

The nation was ranked fifth best after New Zealand, Denmark, Finland and Sweden in Transparency International’s Corruption Perceptions Index, compared with 75 for China and 95 for India. It came in third for protecting intellectual property rights in a survey by the World Economic Forum and its broadband network reaches 99 percent of the population. Ninety-six percent of those over 15 are literate, the government says.

Slowing Growth

Slowing growth across Asia presents one of the biggest threats to Singapore’s expansion. China’s first-quarter GDP rose 8.1 percent, the slowest pace in almost three years, and Premier Wen Jiabao set an annual target of 7.5 percent in March, the least since 2004. India’s economy gained 6.1 percent in the fourth quarter, from 8.3 percent a year earlier, while GDP in Singapore will probably rise 1 percent to 3 percent this year, down from 4.9 percent growth in 2011, the central bank.

Companies may struggle to find enough local people because trading of commodities such as liquefied natural gas only began recently, said Damian Stewart, the director for Asia at London- based Human Capital Search. The recruiter moved Stewart to Singapore in 2008. Its clients have included BP Plc, Trafigura and Noble Group Ltd. (NOBL), according to its website.

Trade Routes

The hiring and transfer spree among companies trading physical commodities isn’t mirrored at larger banks, according to Tyler Jackson, an executive director at New York-based recruiter Options Group. Banks are concerned about increasing competition, a challenging trading environment and the potential impact of tighter regulations from the U.S. and U.K., he said.

“In the past year plus, we have seen a lot of the big investment banks ceasing from expansion in Singapore or in certain cases reducing headcount,” Jackson said. “On the other hand, there are a few smaller emerging-markets or local banks expanding and adding headcount.”

The new arrivals are the latest in a procession that stretches back to the modern port’s founding by Britain’s Sir Thomas Stamford Raffles in 1819. While Singapore is bereft of natural resources, it sits on trade routes including the Strait of Malacca, a transit point for about 25 percent of the world’s seaborne oil. The city is Asia’s biggest oil-trading hub, handling everything from over-the-counter crude oil and fuel oil to futures in copper, iron ore and pepper.

Bank of China

BHP’s plan to transfer 90 jobs to Singapore will take the total to about 400, said Kelly Quirke, a spokeswoman. The Melbourne-based company has announced plans to shut its office in The Hague and relocate coal and freight units to Singapore. Trafigura will move more senior energy and metals traders to the city, said Pegler.

Cargill expanded its Singapore staff to about 500 in the five years to 2011, according to Beate Bieniek, a spokeswoman. The Minneapolis-based commodities trader calls the country its regional hub and its global headquarters for metals. The company also handles grains, oilseeds, energy and freight from Singapore.

The London Metal Exchange opened its first Asian office in Singapore in 2010 and started trading smaller contracts last year in partnership with Singapore Exchange Ltd. (SGX) The world’s biggest metals bourse approved a Bank of China Ltd. unit last month as its first Chinese company member and said it may offer the option of clearing and settling trades in yuan.

Anglo American has chosen Singapore as a marketing hub for everything it produces apart from diamonds, according to James Wyatt-Tilby, a spokesman. The London-based company produces iron ore, coal, copper, nickel, diamonds and platinum group metals.

Mercuria Hiring

Standard Bank Group Ltd., Africa’s largest lender, has a team of 12 people in Singapore for bulk commodity trading. Eight of them were added in the past year, said Jim Coupland, the global head of industrial metals at the Johannesburg-based bank.

Mercuria, an energy-trading company seeking to expand into metals and farm commodities, hired Andrew Perkins from Morgan Stanley to head its new global agriculture team from Singapore, according to two people with direct knowledge of the matter. The Geneva-based company has also recruited oil-product traders in the city, Chief Executive Officer Marco Dunand said April 24.

About 80 percent of growth in oil demand from 2010 to 2035 will come from developing Asian nations, the Organization of Petroleum Exporting Countries estimates.

“You probably want to be located here right now, especially if you want to position yourself for both China and India,” said Dominic Schnider, the Singapore-based global head of commodity research at UBS AG’s wealth-management unit. “That’s the region where growth is coming from.”

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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