(Reuters) - Some Chinese financial groups have struggled to build up a heavyweight trading business on the London Metal Exchange, the world’s top market for industrial metals.
Below are details of the five Chinese institutions, including some of China’s biggest banks, that have set up LME trading operations and one that is preparing to join them.
There are two Chinese Category 1 LME members allowed full trading, including on the open-outcry floor, and three Chinese Category 2 members able to trade on the LME’s electronic platforms and the telephone market but not in the ring.
Nanhua Financial (UK) Co Ltd, incorporated last month, plans to apply for Category 2 LME membership, making it the sixth Chinese clearing member of the exchange.
Its parent, privately held Nanhua Futures, is one of China’s biggest brokerages, with assets of more than 15 billion yuan ($2.2 billion), according to its website, and has already expanded into the United States and Singapore.
The UK unit aims to start trading in the first half of next year.
BOCI Global Commodities (UK) Ltd was the first Chinese institution to join the LME, in 2012, the same year that Hong Kong Exchanges & Clearing Ltd (0388.HK) acquired the LME for $2.2 billion.
BOCI, the investment banking arm of state-owned Bank of China, the country’s No. 4 lender by assets, is a Category 2 LME member.
BOCI’s UK unit posted after-tax profits of $2.407 million in the calendar year 2017, up from $2.105 million the year before, according to a filing.
In 2014, GF Financial Markets (UK) Ltd was the first Chinese company to trade on the open-outcry floor of the LME, joining as a Category 1 member.
The unit of China’s GF Securities bought the commodities brokerage unit of Natixis (CNAT.PA) for $36.1 million in 2013, including its LME ring dealing business, as the French bank wound up its commodities broking unit.
GF Securities, launched in 1991, is one of China’s top integrated investment banks, with 10,000 institutional clients, 3.8 million retail clients and more than 250 regional offices, according to its website.
It bills itself as the largest non-government controlled investment bank in China.
The UK unit posted a loss of $331,000 last year, down from a loss of $1.71 million in 2016. The company told Reuters it is “now a profitable business”.
In 2016, CCB International, a subsidiary of China Construction Bank, completed its purchase of a 75 percent stake in Britain’s Metdist Trading Ltd.
CCBI Metdist Global Commodities (UK) then became the second Chinese-owned company to gain access the LME trading floor as a Category 1 member.
China Construction Bank is China’s second biggest lender by assets.
CCBI Metdist posted a loss of $6.7 million in the financial year ended Aug. 31, 2017 compared to a loss of $2.6 million in the previous financial year.
In 2015, China’s ICBC bought a majority stake in the London-based global markets unit of South Africa’s Standard Bank, which trades in commodities, bonds, shares and foreign exchange, including a metals unit that was a LME Category 2 member.
State-controlled Industrial and Commercial Bank of China (ICBC) is the world’s largest commercial bank, while Standard is South Africa’s biggest lender by assets and operated one of the biggest LME trading operations, industry sources said.
In 2016, ICBC Standard reduced its base metals business to cut costs, sources close to the bank told Reuters.
Last year, ICBC Standard’s commodity business posted a pre-tax loss of $37.2 million. The company does not provide profit figures for its base metals business, but said metals revenue was lower than forecast “due to higher funding costs, compressed margins and muted client activity”.
CHINA MERCHANTS SECURITIES (600999.SS)
China Merchants Securities (UK) Ltd launched trading on the LME in January 2015 as a Category 2 member, the third Chinese-owned clearing member.
China Merchants Securities, listed in Shanghai and one of China’s top five investment banks, has 243 branches in China, serving more than 8 million clients, according to the bank. It is 50.86 percent owned by the state-owned China Merchants Group.
Turnover at the UK unit last year fell 34 percent to $8.8 million, while operating profit slid 53 percent to $1.2 million, its financial statements showed.
Reporting by Eric Onstad; Editing by Giles Elgood