Cargill has decided to close its physical steel trading business in China’s domestic market. As the market has been impacted more by financial forces since last year, the physical trading arm of the company can no longer bring as much value as before, Kallanishunderstands.
The physical steel team of the Cargill Metals Business Unit (BU) will all be disbanded by this July and eight traders and merchants, including those working for this company for over ten years, will leave. One of them may join a strategic customer team in the company, Kallanish learns.
The corresponding back room staff will be transferred to other teams or be laid off as well. The BU also recently closed its Vietnam office. The iron ore and price risk management sector of this BU will not be impacted.
More financial players, including macro funds and quantitative trend-following funds, have allocated their money to China’s steel futures markets to hedge their positions in other assets beyond commodities. The fundamentals of the spot steel market thus have less power to determine the price except in the delivery month of the most traded contract. This structural change of the market is leading trading houses to invest more to build connections with funds or hire talents from them. As a sophisticated and experienced trading company, Cargill is heard to be moving in this direction in the future.
