Citigroup to develop shipping operations
Citigroup Inc., the U.S. bank that trades up to a fifth of all freight derivatives, hired a director from a London shipbroker to develop its physical shipping operations as the bank seeks to expand its commodities business. Alistair McLuskie, previously a director with Simpson, Spence & Young Ltd., the world's second-largest shipbroker, will join the bank as director of physical freight on April 1, Citigroup said in an e-mailed statement today. He will report to Boudewijn van Vliet, head of freight, it said.
Citigroup said last week it plans to increase headcount within its commodities business by 40 percent over the next three years. Such a move will help cement the bank's position in commodities as rivals including Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. boost their own presence in commodities markets.
"These kinds of expansions trigger the need for physical freight," Van Vliet said in a telephone interview. "We see more and more need to have tailor-made hedges and therefore we need to be able to offer physical freight."
Citigroup is responsible for between 15 percent and 20 percent of trading on freight derivatives, Van Vliet said. Operating ships will also help to improve Citigroup's knowledge of the physical freight market, aiding its derivatives trading, he said.
The market for freight derivatives was worth about US$35 billion in 2009, according to SSY Futures Ltd. estimates.
"We see the need to be able to offer risk management on the physical side to customers who have physical freight exposure, as they produce and sell commodities around the world," he said.
Morgan Stanley owns a 48 percent stake in Heidmar Inc., a Norwalk, Connecticut-based shipping company that controls a fleet of vessels on behalf of owners. It also charters dry-bulk commodity carriers. J. Aron & Co., Goldman Sachs's commodities trading division, began hiring more commodity carriers from April last year after it bought Constellation Energy Group Inc., according to data from Clarkson Research Services Ltd., a unit of the world's biggest shipbroker.
JPMorgan Chase & Co. agreed to buy some units of RBS Sempra Commodities LLP last month for US$1.7 billion in cash to expand its energy and metals-trading businesses.