UBS to Exit Commodities, Excluding Precious Metals

Discussion in 'Commodity Futures' started by osorico, Oct 4, 2008.


    By Feiwen Rong and Chanyaporn Chanjaroen

    Oct. 3 (Bloomberg) -- UBS AG, the European bank hardest hit by the credit crisis, will stop over-the-counter trading in natural gas, crude oil, power, agricultural products and industrial metals as it cuts jobs to reduce costs.

    The Zurich-based bank will retain its precious metals trading operations, started about a century ago, its commodities index unit and exchange-traded commodity derivatives business, spokesman Dominik von Arx said today by phone from London. He declined to say how many jobs would be cut.

    ``You've got a liquidity crisis -- businesses need to survive and people need to raise cash and cut costs,'' Mark Mathias, chief executive officer of Quantum Asset Management Ltd. in London, said today by phone. ``Commodities remain a good business going forward.''

    UBS has posted writedowns of $44.2 billion since the credit crisis began last year, more than any other European bank. The bank said yesterday it made a ``small profit'' in the three months through September, its first profitable quarter in more than a year after it cut holdings in mortgage securities.

    The commodities unit started in 2005 and is led by Todd Morakis, 43, in London. The Reuters/Jefferies CRB index of 19 raw materials has tumbled 8.4 percent this year, after a 25 percent plunge in the third quarter.

    UBS will cut 2,000 jobs at its securities unit, or about 10 percent of the total, the bank said in a statement today. UBS had already announced 6,000 job cuts in the past year. At the end of the year, the investment bank will have about 17,000 employees.

    The bank acquired its power- and gas-trading business in North America in 2002 from Enron Corp., and became a member of the London Metal Exchange, the world's largest bourse for copper, in September 2005.

    UBS's exchange-traded derivatives commodity unit is part of its Prime Services Group within the equity division. Clients include Singapore-based Aisling Analytics Ptd., operator of the $2.3 billion Merchant Commodity Fund.
  2. lordjohn8


    Does anyone think the sell off in commodities is over done? I'm thinking about formulating a strategy to profit from this and a couple of my questions are:

    1) Is the sell-off overdone
    2) If it is, how likely could mass hysteria just kill a long position anyway
    3) Which commodities have been hit much harder than they should have been


    also, what does anyone think about the USD in the 6-9 month range? We've got a rate cut possibly cutting, but what about the other countries?
  3. MGJ


    I think this is a mistake; in my experience, industrial metals have been much more profitable trading vehicles than precious metals in the past four or five years. But perhaps UBS AG seeks to operate as a market maker rather than as a directional trader.
  4. lordjohn8


    isn't market making usually what banks focus on since there isn't nearly as much risk as there is in directional trading?
  5. during the great depression, commodities were a horrible place to be. Only gold and govt bonds gained value