(Nov 28): Shanghai has set up a state-owned commodities trading firm in a bid to strengthen the city’s role in both domestic and international raw materials markets.
Shanghai Guomao Holding Co was launched on Thursday by the city’s major, Gong Zheng, the municipal government said in a statement. The aim is to build a “new, internationalised commodity trading and investment platform with competitiveness in key sectors”, it said.
The city is mainland China’s major financial hub and home to bourses such as the Shanghai Futures Exchange, but it has long lacked a large, state-owned general trading house — unlike smaller centers such as Hangzhou or Xiamen. For decades, the dominant commodities players in Shanghai have instead been private firms like Maike Metals International Co, or foreign traders such as Trafigura Group.
Shanghai Guomao will pursue an integrated business model spanning “upstream resource investment, midstream supply-chain management, to downstream industrial operations”, with exposure in both physical and derivatives commodities markets, the municipal government said. It has registered capital of CNY13 billion (US$1.8 billion or $2.4 billion), according to a filing earlier this month from one of its shareholders, Shanghai International Port Group Co.
The new company was a hot topic of conversation at a major copper conference in Shanghai this week. Traders, miners, bankers, and other industry professionals are eager to learn more details and the personnel makeup of this potential partner — or competitor. Some are also looking for job opportunities.
Zheng Yuanhu, a veteran in industrial engineering and corporate finance and previously the head of a state-owned investment vehicle, will be the chairman of Shanghai Guomao, according to a separate statement from the Shanghai government. Luo Dongyuan, who used to be a vice-president of brokerage Guotai Haitong Securities Co, was named as the president of the firm.
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China’s central government has imposed tighter controls on commodities trading following a series of price swings and scandals. This has squeezed the already limited room for growth among privately owned firms, while creating more market opportunities for state-owned companies.
The establishment of the new company will strengthen Shanghai’s role in commodity trading and price formation, enhance the international influence of the “Shanghai price”, and contribute to the goal of the city becoming an international trading hub, the municipal government said.
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