SINGAPORE - CITIGROUP is pushing to expand its Asia commodities trading operation by half over two years, with a focus on moving into coal and emissions markets, its sector head said on Tuesday.

Undeterred by the mounting subprime-related losses at investment banks including Citi, many banks are racing to expand their operations in a sector where they hope to profit from rising and volatile prices underpinned by booming Asia demand.

Ananth Doraswamy, Citigroup's head of commodities in Asia, said he hoped to expand the 17-strong team in Singapore, Japan and Australia to 26 by end-2009 - even as Citigroup itself slashes 4,200 jobs worldwide to help shore up its balance sheet after US$10 billion (S$14.2 billion) in fourth-quarter losses.

'Until last year we were mainly focusing on energy and metals... but now we have expanded our product suite to include soft commodities, coal, freight and emissions in Asia,' said Mr Doraswamy, the New York University Stern Business School alumnus.

With oil's price rally threatening to stall below US$100 a barrel and industrial metals yet to regain their poise after surging in 2006, bankers are seeking new markets to help customers manage risk or back their traders' bets.

Benchmark Australian coal prices have surged by more than half over the past month, with utilities growing increasingly anxious about their exposure to the once-placid market.

At the same time, emissions limits in Europe and expanding green energy investment have made carbon trade a favoured area.

Slower growth pace
Mr Doraswamy, who joined the bank via its associate programme in 1995, said more Asia-based consumers in Asia are considering hedging using more non-traditional products.

'Most consumers (in Asia) were using strictly futures, but now they are becoming aware of over-the-counter options and structured products that (can be) tailored to suit their needs better,' he said.

The 42-year old golf enthusiast, says revenues from its Asian commodities and energy business are likely to grow at a slower pace of double-digit growth this year after doubling last year.

'You have to understand the number is coming from a high base,' he said.

Citigroup, the largest US bank by market value, was forced to write down more than US$18 billion in January due mostly to subprime losses.

Prices of commodities such as oil, gold, grains and copper had trounced gains in the stock markets in the past two years, prompting investment banks such as UBS , also one of the hardest hit by the global credit woes, to focus on the commodities business in China and India.

The Reuters/Jefferies CRB Index hit an all-time high last Friday after climbing more than 25 per cent since the start of 2007, while the MSCI world equity index had wiped out all its 2007 gains and was flat. -- REUTERS

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