Bank of China International Holdings Ltd. (BOCI), the investment banking arm of China’s state-owned financial giant, is scaling back its commodities business following a period of extreme price volatility that has shaken management’s confidence in the sector.
According to sources familiar with the matter, the bank has significantly reduced its client base in commodities by more than two-thirds. In recent weeks, it has also conducted layoffs in its commodities team in Shanghai and Beijing. The decision follows an internal review initiated last year, reflecting growing concerns over risk exposure in the sector.
This strategic retreat marks a notable shift for BOCI, which had been a pioneer among Chinese banks in challenging global investment giants like JPMorgan Chase & Co. and Macquarie Group Ltd. in the international commodities market. The firm has maintained a presence in major financial hubs, including London, New York, Singapore, and Shanghai, positioning itself as a key player in global commodity trading.
BOCI was the first Chinese company to become a member of the London Metal Exchange (LME) in 2012, setting a precedent for Chinese financial institutions in global commodities markets. It also gained clearing memberships with the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), demonstrating its ambition to become a dominant player in commodities trading.
However, the bank’s enthusiasm for commodities has been dampened by a series of market shocks. The 2022 nickel short squeeze, which saw Tsingshan Holding Group Co. caught in a massive position, exposed BOCI and other financial institutions to significant risk. More recently, a sharp divergence in copper prices between New York and London raised further concerns about volatility and market stability.
As a result, BOCI has taken steps to reduce its exposure, particularly in metals trading, while continuing to maintain relationships with large Chinese state-owned energy firms. This move aligns with a broader trend, as other major financiers of China’s metals industry—such as JPMorgan and ICBC Standard Bank Plc—have also retreated from the sector.
Despite the pullback, sources indicate that Bank of China’s parent company will continue to operate its trade-finance lending business, which provides credit facilities to commodity traders worldwide. This means that while the investment banking arm is downsizing its direct involvement in commodities trading, the broader financial institution remains engaged in financing major deals.
The review of BOCI’s commodities division followed the departure of Li Tong, its former CEO, in 2023. Li, the daughter of a former member of the Politburo, played a key role in expanding the bank’s commodities footprint. Since her transfer to Bank of China’s Hong Kong unit, the commodities business has received less senior-level backing, further contributing to its downsizing.
This shift raises questions about the future of Chinese banks in the global commodities market. Will other Chinese financial institutions follow BOCI’s lead in retreating from metals trading? Or will they seek alternative strategies to manage risk while maintaining market presence?
The commodities market has seen unprecedented price swings in recent years, fueled by factors such as:
Geopolitical tensions, including the Russia-Ukraine war and its impact on energy and metals markets.
Supply chain disruptions from the COVID-19 pandemic and subsequent global recovery.
Regulatory scrutiny and market intervention, as seen in the LME’s controversial cancellation of nickel trades during the 2022 short squeeze.
Shifts in demand driven by China’s evolving economic policies and the global transition to green energy.
For financial institutions, such volatility presents both opportunities and risks. While some banks have profited from price swings, others—like BOCI—have been burned by exposure to extreme market events.
BOCI’s retreat from commodities raises several key questions for the future of China’s investment banking ambitions in the sector:
Will other Chinese banks follow suit? – BOCI was one of the most aggressive Chinese lenders in commodities, but if Bank of China is pulling back, could Industrial and Commercial Bank of China (ICBC) or China Construction
Will state-owned enterprises (SOEs) take a larger role? – With banks stepping back, Chinese state-backed trading houses and industrial firms may play a bigger role in commodities markets.
How will global commodity trading be affected? – If Chinese banks reduce their presence, Western institutions like Goldman Sachs, Morgan Stanley, and JPMorgan may regain market share.
Bank of China International’s decision to scale back its commodities business marks a significant shift in China’s investment banking strategy. While the parent company remains engaged in trade-finance lending, the retreat from direct commodities trading suggests a more cautious approach to market risk.
As the global commodities market continues to face uncertainty, BOCI’s move could signal a broader reassessment of risk exposure among Chinese financial institutions. Whether this is a temporary adjustment or a long-term strategic shift remains to be seen.
For now, the message is clear: China’s leading investment banks are no longer willing to bet big on commodities without careful risk management.
