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Glencore International and Credit Suisse have agreed to terminate their strategic alliance and replace it with a licensing and consultancy deal, Glencore told MB.
“Credit Suisse and Glencore can confirm they have agreed to replace their existing alliance with a new, multi-year licensing and consulting agreement with regard to Credit Suisse’s commodities business,” a spokesman for the Swiss trading house said.
The companies formed the alliance in August 2006, creating a derivatives and structured products trading business for both base and precious metals based at Glencore’s offices in Baar and Credit Suisse’s offices in Zurich.
The joint venture enabled Credit Suisse to rapidly accelerate its commodities division while allowing Glencore access to Credit Suisse’s structured products and derivatives business.
One source said that the termination of the alliance may have been prompted by Credit Suisse building up its own metals trading team.
“Credit Suisse were very close to Glencore, but then they built up their own metals team so there may have been some conflict of interest,” he said. “Either you go completely exclusive or you don’t.”
The source added that this was a question arising from when the original alliance was signed.
“Back in 2006 people were wondering why a bank would tie up with such a company when it was also doing business with others,” he said. “That closeness to Glencore is not an advantage if you want to do outside business.”
A broker told MB that, since the alliance was signed in 2006, he had become wary of speaking to Credit Suisse employees because of the association with Glencore.
“I’m not sure how well the deal worked in reality. Every time someone from Credit Suisse called I assumed that Glencore was behind it,” he said.
In January 2007, Credit Suisse hired Adam Knight, then head of metals trading at Goldman Sachs, to head the invigorated commodities business following the signing of the Glencore alliance six months previously.
With the termination of the alliance, Knight has now left the bank. But it is not a severance of all ties between the two companies. Credit Suisse will continue to work with Glencore on joint initiatives, such as the Credit Suisse Glencore active index strategy (Gains) index.
In June 2009, the bank and the trading house launched the index to enables investors to gain access to Glencore traders’ views of how commodities prices will move. The index follows about 20 commodity prices, including exchange-traded metals copper, aluminium, lead, zinc and nickel but not tin.
“We look forward to continuing to work with Glencore in the future,” a spokesman for Credit Suisse said.