Singapore has the potential to become the world's largest commodity trading hub in the decade ahead as trade flows shift towards Asia.
The Republic - already Asia's largest commodity trading hub - is well-placed to take advantage of rising demand for commodities like metals and agricultural products in the region, said Trade and Industry Minister (Industry) S. Iswaran.
He was speaking at the Global Trader Dialogue, a gathering of leaders in the global commodity trading community, at the National Gallery yesterday.
The commodities sector has had to grapple with a challenging operating environment in recent years, Mr Iswaran said.
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Oil prices have fallen sharply, oversupply in the agri-commodities sector has squeezed margins and volatility is the new normal in the metals and minerals markets. But Singapore's commodity trading sector has remained resilient, the minister noted.
Trade revenue in the sector grew at an average annual rate of 7 per cent over the past decade to reach almost US$900 billion (S$1.25 trillion) last year.
While "upstream" commodities producers have been hit hardest by global market volatility, most of the companies here are involved in "downstream" trading activities, said Mr Satvinder Singh, the assistant chief executive of IE Singapore. The trade agency is the government body driving the sector's growth here.
SPACE FOR GROWTH
Even though we're already Asia's largest hub, there is a whole gamut of potential and I think we haven't arrived yet.
MR SATVINDER SINGH, assistant chief executive of IE Singapore.
"When there's an oversupply situation, the downstream trading side needs to optimise on the supply to minimise losses... In good times, downstream companies prosper. In bad times, downstream companies are also very active," Mr Singh told The Straits Times in a separate interview about the sector's prospects.
Employment in the sector grew at an average rate of 7 per cent per year over the past decade, and it now employs about 15,400 people. About 80 per cent of these jobs are professional, manager, executive and technician roles, and more than 70 per cent are held by Singaporeans and permanent residents.
In his speech, Mr Iswaran noted that about 80 per cent of the world's leading commodity trading companies have a presence here.
These include Anglo-Swiss commodity trading and mining giant Glencore; energy firms BP, Shell and PetroChina; the world's top-four food commodity traders - Bunge, Cargill, Louis Dreyfus and Archer Daniels Midland; as well as home-grown companies Olam, Wilmar, Kairos and Fortrec.
Close to 40 more commodity trading companies established a presence here last year.
Mr Singh said IE Singapore is "very bullish" about the sector's prospects.
About 60 per cent of global commodity flows take place in Asian time zones and this share is set to grow as the region's emerging economies expand, he noted.
There are a number of commodity trading hubs around the world, including Chicago, Houston, Geneva, London, New York and Hong Kong. Singapore ranks among the top three.
"Even though we're already Asia's largest hub, there is a whole gamut of potential and I think we haven't arrived yet," Mr Singh added. IE Singapore plans to ramp up efforts to develop the commodity trading ecosystem here, by building a local talent pool, helping home-grown commodity firms grow abroad, and bringing in regional commodity players as they internationalise.
Agri-commodity firms "have started relocating their regional and global headquarters to Singapore" due to growing demand from India and China, and up-and-coming markets like Indonesia, Myanmar and Bangladesh, said Mr Vishal Vijay, head of business development at Singapore-based agri-commodities trading firm, Agrocorp International.
The company, which has 70 staff here and 250 globally, is looking to ramp up investment in its burgeoning processing business, Mr Vijay said. It has four processing plants in Canada and one in Myanmar.
"By 2018, we hope to have further processing assets in India, Australia, the United States and Bangladesh, which will allow us to access more of the value chain," he added.