14 Jan 2014
Guangdong “goes out” (company case studies 4): Investing in the commodity futures delivery business via Hong Kong
Commodity futures delivery and warehouse management are some of the main businesses of Nanchu Repository Management Group Co Ltd. Nanchu has indicated that it hopes to enhance its participation in international commodity futures delivery business, through setting up a delivery and warehousing base in Hong Kong or co-operating with Hong Kong operators, and making use of its professional services including logistics, financial and legal services.
Diversified warehousing business booming with the times
Headquartered in Foshan city in the Pearl River Delta (PRD), Nanchu is a comprehensive repository management company owned by Guangdong Rising Nonferrous Metals Group Co Ltd. It provides integrated services including warehouse management, futures delivery, transportation operations, warehouse financing and bonded warehousing. With the rapid expansion of transportation and logistics activities on the mainland, market demand for warehousing services has increased, and Nanchu has taken the opportunity to actively provide its clients with diversified warehousing and logistics services.
Following years of development, Nanchu has set up a comprehensive warehousing and logistics network in different regions in China providing various services including port collection/delivery, cargo distribution, international freight forwarding, customs clearance and logistics information services. As a transaction warehouse designated by Shanghai Futures Exchange and Dalian Commodity Exchange, the company is able to provide its clients with futures delivery services ranging from warehousing, production and issue of warehouse receipts, to acting as sole agents until completion of delivery. Commodities handled include aluminium, zinc and linear low-density polyethylene. With an annual handling capacity of more than 20 million tons, the company ranks among the top in the mainland warehousing industry.
Developing global business
Amid globalisation, logistics activities in China are on the fast track to integrate with the international network. Hence, Nanchu is actively looking for opportunities to co-operate with mainland and overseas partners, and to branch out into value-added services in the process.
For example, in view of the liquidity problem faced by many small and medium-sized enterprises, Nanchu has taken the lead to enter into co-operation agreements with more than 10 mainland and overseas banks including Ping An Bank and BNP Paribas, and made use of its warehouse logistics network in different regions (including Beijing, Tianjin, Shanghai, Zhejiang, Yunnan, and Hebei) to develop warehouse financing management arrangements. Under the arrangements, the borrowing party can obtain loans from the banks after his goods have been stored in Nanchu warehouses, by producing warehouse receipts issued by Nanchu and using the goods as collateral. Collateral goods stored in Nanchu warehouses include ferrous and non-ferrous metals, chemical products, petroleum, mineral products and agricultural products.
As mainland demand for various commodities increases, Nanchu expects that international commodity futures transactions involving the mainland will also become more frequent. The company plans to set up commodity futures delivery bases outside of the mainland or to enter into co-operative arrangements with overseas operators, in order to enhance its capability in providing logistics and information exchange services for international bulk commodity futures. In Nanchu’s opinion, Hong Kong has an advantage over other regions in Asia as a platform for such business, thanks particularly to the fact that Hong Kong’s logistics network is fully integrated with the international market. The company hopes to further explore opportunities for developing warehousing business through Hong Kong.
Hong Kong as a springboard for overseas investment
Nanchu told HKTDC that it considers Hong Kong a useful platform to the company in developing international commodity futures delivery services. This is because Hong Kong’s logistics and warehousing services are of advanced international standard, Hong Kong is able to provide various professional services including international financing and legal services, and large foreign warehousing companies have all set up operations in Hong Kong. Like many mainland enterprises, Nanchu had in the past focused mainly on developing the mainland market, and was a newcomer to overseas investment and international business. In particular, the company was not familiar with overseas market conditions, business environment and laws and regulations, and had little connection with overseas partners. In giving consideration to Hong Kong as a platform for developing its international operations, another factor taken into account is Hong Kong’s proximity to the PRD, which will facilitate Hong Kong operators in contacting Guangdong enterprises. As the mainland’s trade with other countries continues to grow, the company’s future target is to further enhance its international operations. The company hopes that interested service providers can provide detailed proposals which will help it capture international business opportunities and further develop its logistics operations.
|(1)||China has been actively building platforms to encourage enterprises to “go out”. In the third and fourth quarters of 2013, HKTDC Research conducted in-depth interviews with some Guangdong enterprises (including the abovementioned company), which have used or intend to use Hong Kong services, focusing on their services requirements when they are “going out”.|
|(2)||For more information about China’s “Going Out” policy and Guangdong “Goes Out”, please refer to the research article Guangdong: Hong Kong service opportunities amid China’s “going out” strategy and the research report China's "Going Out" policy: Guangdong's demand for professional services of the HKTDC Research|