Base metals house of the year: BOCI

Base metals house of the year

With offices in Hong Kong, London, Singapore and Shanghai, BOC International (BOCI) – the wholly owned investment bank of the Bank of China – has been dedicated to serving base metals clients since 2012, when it became the first Chinese clearing member of the London Metals Exchange (LME). Since then, BOCI has grown into one of the biggest brokers and clearers on the LME for Asian clients, providing global commodities services to clients in China, Southeast Asia and Europe. With both China onshore and offshore platforms, BOCI provides a full-scale financial solution for its base metals clients in hedging, risk management, market strategy, financing and physical solutions.

Yao Lei
Yao Lei, BOCI Global Commodities (UK)

The true test of a robust financial operation comes in times of extreme stress. In 2021, amid the Covid-19 pandemic and volatile market conditions, BOCI did what it has done so many times before when faced with a crisis: it continued to display a strong and reliable business model to its clients and peers, as well as a core commitment to the highest industry standards. Over this turbulent period, BOCI continued growing and consolidating its dominant position in base metals, particularly in the Asian market. During 2021, BOCI’s base metals trading volume reached USD120 billion, and significantly increased its physical trading volume, while net revenue rose by 19% year-on-year.

To achieve this, BOCI works closely with clients and understands their short-term and long-term needs by constantly improving its product range and services. BOCI has built up a wide range of clients from miners, smelters and trading houses to downstream consumers over the years, which enables the company to provide a comprehensive range of products and services. Meanwhile, BOCI has further consolidated its reliable platform, which allows clients to focus on seamless hedging and trading, which was much needed during the stressful past 12 months. Such an approach allows BOCI not only to increase its client base by 10% across all sectors within the industry, but to organically grow a range of products and services from cleared futures to over-the-counter products, and to build out a significant financing and physical business.

BOCI’s unsurpassed knowledge and understanding of its Chinese clients’ needs provide it with a major competitive advantage, which is further enhanced by its highly diversified portfolio of products, which assists physical businesses and offers hedging capabilities. Furthermore, discounting, foreign exchange services and precious metals hedging are offered to BOCI’s base metals clients subject to their business needs. In this context, profit discounting provides clients with flexibility in cashflow management to avoid any credit risks, while FX services help clients mitigate the currency risk when buying/selling metals using different currencies. At the same time, the capability for precious metals hedging helps base metals clients manage the market risk of their by-products, such as gold and silver.

This said, BOCI’s base metals activities are not limited to the LME market. In addition to the growth in its futures and derivatives trading, BOCI offers physical warrants trading to its clients. This facility, and the company’s comprehensive understanding of client needs, led to a significant increase in the volume of physical warrants in 2021 to 1,473,543 metric tons, underlining BOCI’s leading position in the market and as a pioneer in product design and sophistication.

Its extension of the physical warrant to financing combined products is a case in point, allowing clients to fund and reduce margin requirements by using their physical stocks as collateral and then allowing them to source more materials from different locations. Such portfolio structures enable clients to focus on their own physical trading strategies instead of having to concern themselves with the complexity of exchange and derivatives requirements. In parallel with these initiatives, the past 12 months saw BOCI significantly develop its metals repo trading capabilities with stocks in the Shanghai Free-Trade Zone (SFTZ), with multiple metals repo transactions in the SFTZ over the year totalling USD208 million. Further product innovation, such as repo/warrant/physical collaterals, allows BOCI’s clients to fully capitalise on the arbitrage opportunity in the onshore and offshore markets.

At the same time as these developments in physical warrant trading, BOCI has continued to enlarge its footprint in the Chinese base metals market. In May 2020, partnered with the Bank of China Shanghai branch, BOCI successfully conducted the first cross-border bonded warehouse base metals warrant transaction nominated in renminbi within the Yangshang Free-Trade Port Area in Shanghai. It was a breakthrough in the base metals physical market, as it was the very first cross-border renminbi settlement that helped promote the offshore transit business in the SFTZ. The product further opens the way to connect China’s domestic market with the global market. Similarly, in November 2020, the Shanghai International Energy Exchange launched a new international copper contract, and BOCI was one of the first participants to trade.

Yao Lei, acting chief executive officer of BOCI Global Commodities (UK), says: “With the solid foundation we have built over the past 10 years and the unique understanding of our clients and the base metals market across China, Asia and the world, we are confident of keeping BOCI’s leading position in the base metals market.” 

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