Glencore Takes Provision on Exposure to Trader Radiant World

(Bloomberg) — Glencore Plc said it has taken a provision on its exposure to iron ore trader Radiant World and confirmed it has stopped doing any new business with the firm.

Bloomberg reported last week that several major commodity traders had stopped dealing with Radiant World amid concerns it provided banks with falsified documents about iron ore trades.

Glencore has taken “some provision,” but its exposure to Radiant World is not material, Chief Executive Officer Gary Nagle told journalists on Wednesday, declining to specify the size of the provision. He refused to say when and why Glencore had decided to stop doing new business with the company.

Little known outside the Singapore- and China-focused world of iron ore trading, Radiant World has risen rapidly within it to become one of the largest traders of the steelmaking commodity. Its growth has been aided by backing from Glencore, which had become a key counterparty in many of Radiant World’s trades, supplying large volumes of ore, especially from Brazil, Bloomberg reported last year.

Glencore still has some pre-existing contracts with Radiant World with some “outstanding items,” Nagle said. The company is “checking how to exit them in a legally compliant manner,” he said, adding that Glencore does not have any concerns about the legality of its dealings with Radiant World.

Bloomberg reported previously that Vitol Group and Cargill Inc. had done no business with Radiant World for several months, while Glencore was not entering into any new business with the company, citing people familiar with the matter. At the time, a spokesperson for Radiant World said that Bloomberg’s reporting was “categorically untrue” and that the company’s trading relationships were “healthy and uninterrupted.”

A representative for Radiant World had no immediate comment on Nagle’s statement on Wednesday.

Glencore routinely held a large financial exposure to Radiant World in the hundreds of millions of dollars, Bloomberg reported last year citing people familiar with the matter, with the larger trader often receiving full payment for the cargoes only when Radiant World had found buyers for them in the Chinese market.

Bloomberg reported last week that banks have been reviewing their exposure to Radiant World, including Intesa Sanpaolo SpA which said it has taken a provision on its exposure to the trader.

Separately, Jefferies Financial Group Inc. has been told that some of the invoices underpinning its financing to another iron ore trader, Sapphire Minmetals Corp., are not genuine, Bloomberg reported on Tuesday.

Sapphire Minmetals and Radiant World have a shared history, as Sapphire Minmetals was majority owned by Radiant World and its founder Pinkesh Nahar until 2015, according to corporate filings in Hong Kong.

However, when asked about Glencore’s dealings with Sapphire Minmetals, Nagle said that he was referring to Radiant World and Sapphire Minmetals as a single relationship.

“When I talk about Radiant and Sapphire it’s on a combined basis, so on a combined basis it’s the same answer,” he said. Glencore looks at Radiant World and Sapphire Minmetals as a single group because of their “similar shareholdings and management,” he said.

Speaking by phone, Rakesh Sethi, chairman of Sapphire Minmetals, said that Nagle’s statements were “totally wrong.”

“There is a totally separate board,” he said.

(Updates with additional background.)

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