NEWSBREAK: Kyen Resources said to wind down trading book in Asia, Europe

Kyen Resources is winding down its physical metals trading book in Asia and Europe, with parent company Shenzhen Feima ordering the liquidation to shore up its own ailing financial situation, multiple sources with direct knowledge told Fastmarkets.

Kyen’s parent company, the Chinese shipping and logistics conglomerate Shenzhen Feima International Supply Chain, has seen its share price collapse over the course of the year.

Shenzhen Feima’s share price has declined by 54% since the start of the year to 5.70 yuan per share. In a July filing, its expenses increased significantly year on year to the point that it cut into shareholder profit, the company said.

As a result, Feima is in the process of pulling financing from Kyen and selling off stock with the intention of shoring up its own position, the sources, who declined to be named because the matters are confidential, told Fastmarkets.

Shenzhen Feima did not respond to requests for comment from Fastmarkets made during the Chinese national holidays. Kyen Resources, headquartered in Singapore, also declined to comment.

Kyen is a significant merchant of refined metals in Asia and has a growing presence in Europe; the position write-down and cancellation contracts have left suppliers and customers scrambling to cover tonnages.

And without cash or credit lines, contracts are being cancelled with suppliers and customers, three sources with direct knowledge of the situation said. “They are not able to pay,” one source said.

Kyen is currently facing a $3.2 million lawsuit from trading rival Mitsubishi Corporation RTM, court filings seen by Fastmarkets show.

Separately, Indian lead producer Gravita announced that it had done a deal with Kyen worth 3 billion rupees ($40.7 million) in a March interview with CNBC TV18.

The deal, said to be for 18,000 tonnes of lead ingots and bullion, is now dead in the water, sources at the company told Fastmarkets.

“They cannot take the stock, so we are diverting it to other customers,” a source at Gravita India Limited said. “We are in discussions with [Kyen Resources] about partial loss, but it’s not big,” the source added.

Kyen Resources’ traders across Asia have been told that physical metal positions will be wound down, some have had books taken out of their hands for sale by the parent company.

“It’s completely being overseen by the parent company and the only information we have is that they are looking at liquidation,” a senior executive at Kyen said.

European book to be liquidated
Kyen’s European book will be wound down as well, Fastmarkets has learned.

The trading house’s European base metals book is an aluminium-centric one, which includes primary and secondary aluminium as well as value-added products throughout the region.

“The whole operation is winding down. There has been liquidation of inventories, headcount reduction and so on,” a source with knowledge of the matter said, adding that there have been redundancies at the company’s London office as well.

Though aluminium premiums in Europe have been volatile due to the US sanctions on Rusal, as well as wild swings on London Metal Exchange spreads, those with knowledge of the situation maintain the liquidation of the European book was the result of financial difficulties with its parent company.

The sell-off of Kyen’s European book comes less than a year after it was launched in West London in early 2018.

Matthew Hadfield, former ICBC Standard head of physical metals and energy, was tapped to lead the 12-member team in London. Former HDP aluminium traders Holger Ellmann and Ross Miles then joined in March.

Hadfield left Kyen in July to re-join Geneva trading house Trafigura, where he worked between 2010 and 2015.

Future in balance
Kyen’s recent financial difficulties have dashed aspirations of further expansion. When the European operation was established, the company had plans to step into trading base metal concentrates and eventually grow to the US.

Now the future of the company lies with its struggling owners; the company could re-establish itself with a clean slate in 2019.

“The parent company will see how they want to take Kyen forward, there’s no firm direction they’ve given as of now,” the senior executive said.

“We are waiting for them to come up with something,” another source said.

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