Cargill fast-tracked its plans in base metals when banks started to step back from commodities and customers were left seeking alternative partners, a senior company executive told Metal Bulletin.

Mike LeSage, president of Cargill’s Risk Management business, said that Cargill had already been providing hedging solutions in base metals for its agricultural clients, as needed.

“We had been considering expanding to work with base metals producers and industrial consumers when the financial institutions started exiting the space and fast-tracked our plans,” he said.

"For many customers, the banks’ exit is an abrupt change. Many have worked with a particular broker for several years, maybe even decades, and finding new partners can be a challenge,” he added.

Cargill recently expanded its risk management business to include base metals derivatives, promoting Federico Stiegwardt to global head of metals risk management and hiring Mike Frawley as a global head of sales and trading, metals risk management.

The company is in the process of applying for a London Metal Exchange category II membership for Cargill Financial Services Europe.

LeSage said Cargill – which is focused on the LME base metals and does not trade or invest in physical base metals - can also provide strategies for producers who need to hedge precious metals that are uncovered during the mining process.

“We have received a warm reception from the market. We see that customers value Cargill’s expertise and longevity in the commodities markets, as well as our approach to work with them to create a diversified hedging strategy,” he said.

“Cargill Risk Management offers a different model than what’s been there in the past. Our approach is customer-focused and customized. We listen to customers to understand their pricing needs and market bias. We then create varied hedging strategies to consider changing market factors,” he added.

The team is currently based in New York, Miami and Minneapolis, with expansions possible “as the opportunity presents itself and the business grows”.

The risk management unit has a twenty-year history of providing commodity price risk solutions in agricultural and energy commodities, as well as currencies, through its 17 offices in 12 countries.

“Our customers might come to us for base metals pricing needs, but they can also hedge natural gas or electricity costs or packaging and resin,” LeSage said.

“Given the strength of the US dollar, many customers are seeking optionality on foreign exchange trades to build a position at more desirable forex rate than the current market,” he added.

Andrea Hotter