Barclays Expands Commodities Team, Expects More in `Bull Cycle'

By Chanyaporn Chanjaroen

Nov. 14 (Bloomberg) -- Barclays Capital expanded its commodities team by about a third to more than 300 people this year, anticipating a resumption of the ``bull cycle'' in raw materials.

The bank had 225 employees in commodities at the start of the year and added people through hiring and the takeover of Lehman Brothers Holdings Inc.'s North American business, said Benoit de Vitry, head of commodities and emerging markets.

``Massive destruction of demand is going to persist in the short term,'' De Vitry, 46, said yesterday by phone from New York. ``But it is not going to last forever, and the natural growth is still there.''

Commodities, after six consecutive years of growth, are headed for their worst annual drop in more than a quarter- century. The Organization for Economic Cooperation and Development expects the economy of its 30 members to contract next year, sapping demand for natural resources.

Barclays Plc, the U.K.'s second-largest bank, bought part of Lehman's investment banking and capital markets operations for $1.75 billion after the 158-year-old U.S. investment bank filed the largest bankruptcy in history in September.

London-based Barclays has already selected which of Lehman's commodities staff to retain, De Vitry said, declining to elaborate. The bank will now work on integration, he said.

``We still want to grow in some aspects of the business,'' De Vitry said. ``We think the market is going to grow further, not shrink. There needs to be more participants.''

Economic Growth

The International Energy Agency, an adviser to 28 nations, yesterday cut its global oil demand forecast the most in 12 years, citing expectations for deteriorating world economic growth. Goldman Sachs Group Inc. and Morgan Stanley reduced their forecasts for metals prices this month.

``We're in a long-term bull cycle of commodities,'' said De Vitry, who joined Barclays Capital in 2000. He was previously managing director and head of commodities at Canadian Imperial Bank of Commerce in New York.

The plunge in commodity prices is spurring mining and energy companies to curb output and delay or scrap projects.

Cia. Vale do Rio Doce, the world's biggest iron-ore producer and second-largest nickel supplier, start reducing output this month. ArcelorMittal, the world's biggest steelmaker, announced deeper production cuts.

Energy companies are cutting back development of Canadian oil sands, the world's biggest oil reserves outside Saudi Arabia, as crude prices plunge.

``The lack of investments will create similar conditions that we've seen in the past few years,'' when supply failed to keep pace with expanding demand, De Vitry said.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net