June 7 (Bloomberg) -- JPMorgan Chase & Co., the third- largest U.S. bank, plans to increase its global commodity-trading staff by more than 30 percent within a year to exploit a boom in raw materials prices and help clients protect against swings in energy and metal prices.

The bank intends to add 40 people to the 110 in commodities trading and marketing, said Catherine Flax, 42, co-head of JPMorgan's global energy business. The biggest expansion within the currencies and commodities teams is in energy, she said.

``There's a lot of difficulty in getting staff at the moment and there will be a fair amount of poaching going on,'' said Clive Furness, managing director of Contango Markets Ltd., a commodity-consulting company based in South Godstone, U.K. ``It's not going to be cheap.''

JPMorgan tied with Deutsche Bank AG as the fifth-largest energy broker among banks in 2006, according to consultant Greenwich Associates. The bank accelerated its expansion in commodities two years ago to help reduce its reliance on fixed income for revenue. Competitors including Bear Stearns Cos. are also adding to their sales and trading teams for commodities.

``We have aggressive growth plans for commodities,'' Flax said in a telephone interview from New York yesterday. The New York-based bank is building up the desk that trades physical oil and emissions credits, and the overall commodity business in Asia, she said.

$10 Million Bonuses

Energy initiatives will add between $100 million and $160 million in annual earnings as early as this year, William Winters, JPMorgan's co-head of investment banking, told investors on March 6. The bank expects to capture as much as 8 percent of the $11 billion in global annual energy-trading revenue it forecasts for 2010, Winters said.

Most of JPMorgan's commodity staff is evenly split between Europe and North America, while about 15 people are based in Asia, Flax said.

Top commodity traders at the biggest securities firms are likely to make $10 million or more in bonuses this year, according to Principal Search Ltd., a London-based executive search firm.

The notional value of commodity derivatives that aren't traded on exchanges increased to $6.4 trillion by the middle of 2006, about 14 times the value in 1998, according to the Basel, Switzerland-based Bank for International Settlements.

UBS AG and Lehman Brothers Holdings Inc. are among other banks that have expanded into commodity trading as prices for oil, copper and other raw materials rose to records in the past 13 months.

Hedge Funds

Bear Stearns, the biggest broker for U.S. hedge funds, hired Sempra Metals Group Ltd. sales executive Sid Strutt and Barclays Capital metals trader John Browning this week. The bank hired three people from Fimat in May to cover agricultural sales.

BNP Paribas SA, France's largest bank, hired Jose Cogolludo from JPMorgan as the global head of commodity derivatives sales and marketing last month. Citigroup Inc., the biggest U.S. bank, hired Mark Konijnenberg as head of corporate commodity sales for Europe in April.

Banks and buyout firms are also buying commodity-related assets. Colony Capital LLC, the property buyout firm led by billionaire Thomas Barrack, this week agreed to acquire Libyan refiner Tamoil SA for 4 billion euros ($5.4 billion). Bear Stearns bought energy-trading assets from Williams Cos., the biggest U.S. pipeline operator, for $512 million in May.

`Long-Term Commitment'

``Commodities are not for everyone,'' Flax said. ``If you look at the entire list of banks in commodity trading, it's hard to envisage that everyone will each have a robust franchise.''

``You need the long-term commitment, client base, technology. It's not a six-month endeavor,'' she said. ``We're fortunate at JPMorgan to have that, but not many of the new entrants do.''

The bank's so-called value at risk, used by accountants and investors to measure potential losses, in commodities averaged about $34 million a day in the first three months, down from $47 million a day a year earlier. The figures appear in a row in a May regulatory filing titled ``commodities and other.''

Flax was appointed last month to jointly run JPMorgan's global energy business with Ray Eyles, 36. She's also global head of commodity sales while Eyles also runs the bank's global metals business.

JPMorgan, which trades energy and metals, is looking to expand its agriculture-trading desk, Eyles, who's based in London, said in the interview. The bank also plans to add staff to its commodity-investor business, which offers investment products to pension funds and other money managers.

Amaranth Positions

The bank said in its March 6 presentation that its expansion in commodities in North America was almost complete. JPMorgan increased trading of derivative contracts including oil, coal and dry-bulk shipping, as well as trading of physical gas and power.

It also said that commodity revenue from client business surged 80 percent last year. The bank got at least $725 million of revenue for taking on half the energy trades from collapsed hedge fund Amaranth Advisors LLC last year and then selling the positions to Citadel Investments Group LLC.

The expansion of commodity trading has stretched the pool of experienced staff and hampered the ability of banks to recruit and retain talent, the U.K.'s Financial Services Authority said in a March report.

``Adding people is difficult to achieve given the current environment,'' Eyles said. ``However, we have been able to attract some of the industry's top talent.''

The bank said on June 4 that it hired Foster Smith from Deutsche Bank to head U.S. power and natural-gas trading. Trevor Woods, who was chosen in February to head U.S. natural-gas and power trading, was one of four people who left JPMorgan's energy desk after George ``Beau'' Taylor, the former head of the bank's global energy business, departed last month.

Flax joined JPMorgan in 2005 from UBS, where she was a managing director in the Zurich-based bank's power and gas business in North America. She previously spent six years at Morgan Stanley. Eyles has been at JPMorgan for 18 years, working in Asia and Europe.

To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net.

Last Updated: June 7, 2007 11:47 EDT