Commodities traders drive Industrial sector
Published 20/02/2014 | 02:30
LOUIS Dreyfus Commodities is joining trade houses including Glencore Xstrata and Trafigura in acquiring commodity warehouses licensed by exchanges.
The Rotterdam-based company, which has 12 coffee storage facilities, said it bought Ilomar Holding, an owner of NYSE Liffe-approved cocoa and coffee warehouses.
The newly acquired company will retain commercial and managerial autonomy, according to Jean-Marc Foucher, chief executive officer of Louis Dreyfus for Europe and the Black Sea.
Mr Dreyfus bought a 51pc stake in GKE Metal Logistics in 2012, a depot operator approved by the London Metal Exchange.
Glencore, Trafigura and Noble acquired warehouse companies that are part of the LME's network to store industrial metals in 2010, as did Goldman Sachs.
"We cannot say whether this deal is part of a trend in the soft markets but it definitely follows the trajectory set in metals," said Nikos Asimakopoulos, a senior associate in London at business intelligence company Alaco, who researched the role of coffee and metals warehouses in futures markets.
"It also makes commercial sense: Ilomar secured a significant portion of its business through Louis Dreyfus."
Ilomar, which owns 4STOX – formerly known as Port Real Estate – and Molenbergnatie, manages more than 400,000 sqm of warehousing space worldwide.
It has facilities in Belgium, Spain, the US and Vietnam, the world's leading producer of the robusta coffee variety used by Nestle to make instant drinks.
The acquisition fits with Louis Dreyfus's plans to expand its fixed assets and provide customers with a range of supply chain services, Mr Foucher said. GKE Metal operates three LME-licensed warehouses in Singapore.
"We are investing in the holding company and expect that the existing management, in whom Louis Dreyfus Commodities has complete confidence, will continue to develop the business in new geographies to serve the supply chain management requirements of their customers," said Mr Foucher.
Molenbergnatie owns depots approved by NYSE Liffe to store coffee and cocoa at the port of Antwerp in Belgium and coffee in Barcelona, while 4STOX has sheds in the Belgian port.
About 84pc of all the coffee and 61pc of the cocoa certified to be delivered against the bourse's futures contracts are stored in Antwerp.
"There's a trend by traders to integrate further to reap the benefits of a fully vertical infrastructure and if warehouses are linked to the exchanges, their value is even higher because you own part of the infrastructure where a lot of volumes are concentrated," said Diego Valiante, head of capital markets at the Centre for European Policy Studies in Brussels.
"If you own part of that infrastructure, you are betting on the fact that these futures contracts will become even more central to the pricing of commodities."
Glencore, the largest listed commodity trader, took over Pacorini Metals and Trafigura acquired NEMS, now known as Impala Terminals UK. Noble owns Worldwide Warehouse Solutions UK and Goldman Sachs purchased Metro International Trade Services.
Louis Dreyfus's acquisition follows proposed changes to warehousing policy by NYSE Liffe and the LME after traders and consumers complained of lengthy wait times for deliveries.
The LME, the biggest metals bourse with a network of more than 700 warehouses, will require operators with queues exceeding 50 calendar days to remove more metal than they take in. NYSE Liffe will give 60 days for depots to load out robusta coffee and cocoa.