Singapore still 'leading commodities hub for Asia'

Strengths in infrastructure, trading network will help it stay ahead in slump: IE Singapore

Singapore remains the leading Asian trading hub for commodities, thanks to its extensive financial sector and strong regional transport links, according to a report released by trade agency IE Singapore yesterday.

Its strengths should also keep it at the forefront despite the ongoing slump in commodities, said Ms Gina Lim, the agency's group director for trade services and policy.

The report looked at factors that help commodity trading hubs grow. It identified six key elements: Strong pool of human capital, an excellent financial and trading infrastructure, a conducive business environment, a robust legal and regulatory framework, a good base of trading network participants and physical infrastructure to store the traded goods.

Ms Lim said Singapore ticked all the boxes and had the added advantage of being in Asia, which is responsible for the bulk of production and consumption of commodities like agricultural goods and metals. For instance, Singapore houses the third largest global foreign exchange market and has good transport links to key Asian cities.

The report, undertaken by management consultancy group Oliver Wyman and commissioned by IE Singapore, showed that 80 per cent of top global commodity firms operate here. Heavyweights like mining giants Rio Tinto and BHP Billiton, as well as agricultural conglomerates Olam and Cargill, have big regional and even global operations running out of Singapore.

"Companies want to be where the action is - in Asia," said Ms Lim at a briefing yesterday.

The success of growing the commodity sector helped boost total international trade in Singapore.

Last year, international trade in Singapore stood at more than US$1.3 trillion (S$1.86 trillion), almost triple the US$483.6 billion value in 2009.

About 14,600 people worked in the trading sector here in 2013, up 5.7 per cent from the year before.

IE Singapore also said that 56 per cent of those were Singaporeans.

Ms Lim noted that the sector was a good place for Singaporeans to work in, from frontline trading to middle operations.

She added the risk management practices of firms here will largely determine how they get through the commodity slump.

"It depends on whether they do hedging. If they do direct buy and direct sell, they may be caught.

"There are traders who tell us they like the volatility because it is in times of volatility - for those who know how to do it - that you can get your profit margin."

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A version of this article appeared in the print edition of The Straits Times on September 30, 2015, with the headline Singapore still 'leading commodities hub for Asia'. Subscribe