May 14 (Bloomberg) -- Sumitomo Corp. Global Commodities Ltd., a London-based unit of Sumitomo Corp., plans to boost its staff by 28 percent within two years to meet increased demand for risk hedging in commodities.

The unit of Japan’s third-largest trading company, which opened in April 2006, will add seven traders and marketers to its current staff of 25, Koichi Iwanaga, general manager of Sumitomo’s commodity business department, said in an interview. The company is also studying new products linked to iron ore, after the price-setting process changed recently, he said.

Copper has jumped 60 percent in the past year and crude oil is up 27 percent on demand led by China. Gold has strengthened 13 percent this year following nine straight annual gains and reached an all-time high on May 12 on concern deficits in Greece, Spain and Portugal will escalate.

“The need for risk hedge has been increasing at home and abroad amid high volatility in prices and volumes, especially after the collapse of Lehman Brothers,” Iwanaga said.

Global commodities assets under management increased $12.5 billion to a record $294 billion last month, mostly because of price appreciation, Barclays Capital said. Fresh inflows from investors contributed $4.3 billion of the total growth, Amrita Sen, an analyst at the bank in London, said May 11. About half of the new investment, some $2.2 billion, went into index- tracking funds, she said.

New Products

Vale SA, the world’s largest iron ore producer, and BHP Billiton Ltd. ended a 40-year system of setting annual prices by signing short-term contracts with Asian steel producers, with the Brazilian company winning a 90 percent increase for the quarter started April 1.

“With the change to a quarterly price setting system, the need for risk hedge has been increased among steel mills,” he said. Economic recovery in Asia will help expand its overseas business and Sumitomo is studying to develop new products linked to iron ore, he said.

Investors put $11.6 billion into commodities in the first quarter, Barclays said. Exchange-traded products attracted $1.4 billion last month and about $700 million went to structured products, Sen said. Barclays’s data cover exchange-traded products, commodity-index-linked mutual funds and structured notes, which are customized products.

Boosting Volume

The unit has 15 traders and marketers in London and the remainder in Singapore, New York and Houston. The Singapore office, which doubled its staff to six in 2009, plans to add one this year to tap rising demand from India, Malaysia, Thailand and the Philippines, he said.

The unit trades raw materials including crude oil, gas, gold, platinum, copper, aluminum and nickel. In Japan, Sumitomo plans to increase its staff to 20 from 18 currently, he said.

“We are planning to increase our overseas volume, or notional sales, as much as two-fold in this year,” Iwanaga said. To meet this target, “we are looking for talented traders and marketers who can work in our team,” he said.

--Editors: Jarrett Banks, Matthew Oakley

To contact the reporters for this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net.

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net

Sourced from www.businessweek.com