Market Update - Commodities Sales & Trading - February 2015 by Selby Jennings

M ARKE T UPDATE C O M M O DI T I ES S AL ES & T R ADI N G F E BR UARY 2015 1

CONTENTS Commodities Market Overview 4

Energy

Base & Precious Metals 8

Bulk Commodities 10

Soft & Agricultural Commodities 12

Commodities Broking 14

About Selby Jennings 16

Contact Details 19

C O M M O D I T I E S M A R K E T OV E RV I E W The drop in commodity prices, particularly oil, has dominated the news over the past few months. Decreasing prices across the market have been further influenced by the continued low growth of the Chinese economy. Various investors and trading houses have been storing large quantities of assets with the hope of selling at a later date at more favourable prices. Forecasts predict this will lead to a considerable low period, before overall prices increase and the market fully recovers. In terms of overall performance, the end of 2014 saw mixed reports. Several hedge funds closed their doors whilst banks looked to capitalise on major withdrawals seen throughout the course of the year. Those still looking to increase their coverage included Citi (buying the Deutsche Bank energy and metals books), Macquarie (rumoured to be in talks to acquire the Jefferies trading unit following a strong 2014 performance) and BTG Pactual (announcing that commodities already contribute to a third of their sales and trading revenues; despite closing their newly developed hedge fund recently). In Switzerland, the dramatic rise in the value of the Swiss Franc caused increasing costs for many of the countryâ&#x20AC;&#x2122;s commodity trading houses, adding to existing tax and regulatory pressures.This could have a significant impact on the levels of total compensation the Swiss trading houses are able to pay in the next 12 months.

KEY MARKET MOVES --

Trafigura have hired RODNEY MALCOLM as Chief Financial Offer for North America in Houston, replacing BRYAN KEOGH.

NANCY KING and PETER SHERK have been named as co-heads of Morgan Stanleyâ&#x20AC;&#x2122;s commodities unit after the departure of SIMON GREENSHIELDS.

MICHAEL SLATER, previously Managing Director and Co-Head of Asian Commodities at Bank of America has joined Hetco in Singapore.

BNP Paribas have hired RYAN NUNES in Houston as Head of North American Corporate Sales, previously Managing Director of derivative sales at Credit Suisse.

MITCH RUBENSTEIN, co-Global Head of Oil Trading at JP Morgan has left the firm to Join Noble Group in Houston.

BNP Paribas have also hired MARTIN SQUIRES as Head of Commodities Hedge Fund Sales from J.P. Morgan

PHIL BEATTY and MARTIN NAUGHTON have left the newly established hedge fund desk at BTG Pactual. Beatty has subsequently joined Gunvor to help develop their power and gas business in London.

ENERGY Over the last few months the energy markets have been dominated by the drop in oil prices and the knockon effect to both the upstream and downstream sectors. This has resulted in a shift of focus on trading desks, which are looking to mitigate potential losses and take advantage of the current oversupply by increasing storage capacities. This, along with the ongoing effects following the withdrawal by several major banks, has resulted in a lot of market movement over the last few months. Following the expiry of Rosneft’s acquisition of part of Morgan Stanley’s trading business in December, the firm has shown signs of growth in the energy markets with the addition of Nigel Felgate from BAML, now head of their European Power and Gas. Glencore have been one of a few trading businesses to further expand their proprietary trading activity over the last quarter with two senior derivatives trading hires. Jean Bourlot, Co-Founder of Higgs Capital Management, joined the business in January along with Kieran McKenna, founder of commodity fund Mastic Investment Advisory. LNG has again been an active area of growth over the last quarter globally, with firms such as E.On, Dong Energy, Koch Industries, and RasGas all adding senior individuals to their commercial LNG teams. Within the bunker markets, the bankruptcy of OW Bunker at the end of last year resulted in their competitors looking to pick up the firm’s best performers. The largest move was that of around 40 staff to Mercuria in the APAC region, to set up a marine fuel focused subsidiary, Minerva Bunkers.

K E Y M A R K E T M OV E S --

Gazprom have hired KEVEN HAZELL, ex TNK-BP, as Global Head of Oil Trading and Origination in London.

KEVIN WALTER is understood to be joining Noble Group in London. Walter was previously with E.ON as Head of Power and Emissions.

Rosneft has made steps to develop their European gas business, hiring RALF BAER, previously with Noble Group, to build the new desk.

ALDEMIR BENDINE has been announced as new Chief Executive Officer of Petrobras, following a major corruption case against the Brazilian oil giant.

Mercuria hires STEVEN BARCLAY, former Lead Gasoline Trader with Goldman Sachs.

Saudi Aramco hired CHRISTIAN PANZA, former Head of Trading for ENI in Singapore, as Marketing Manager.

Glencore have made the double hire of JEAN BOURLOT, Co-Founder of Higgs Capital Management, and KIERAN MCKENNA, ex-Credit Suisse and Founder of Mastic Investment Advisory.

STEVE PROVENZANO, Managing Director within BP Energy leaves the business in Houston.

Noble Group hired SHAUN LIM, formerly with BNP Paribas, as a Senior Oil Trader in Singapore.

GDF Suez hired CHRISTOPHE RENAUD, formerly with Deutsche Bank, as Head of APAC Power and Gas Trading.

Dong Energy hired OLIVIA CUESTA from Iberdrola as Head of LNG Trading.

Statkraft Markets have re-hired CARSTEN POPPINGA as Head of Trading from OMV. 7

B A S E A N D P R E C I O U S M E TA L S The precious metals landscape experienced some considerable changes over the course of 2014, in particular the physical markets. Q4 saw Gunvor pull out of physical precious metals triggering the departure of Cedric Chanu in Singapore and Francois Beuzelin in Switzerland. Deutsche Bank took similar steps to reduce their physical business as it scaled down the securities function. Credit Suisse’s scale down of their commodities business saw the departure of market veteran Kamal Naqvi, the Global Head of Metals Trading and Head of Commodity Sales for EMEA. Despite the down scaling of banks’ metals units dominating market news, many organisations have capitalised on the newly available talent. Most notably, Macquarie hired 7 traders from JP Morgan’s former metals team in various locations.The bank was one of a few that reported strong figures last year with income from commodities trading rising 6.4% to $357 million in the six months ending Sept 30th. Some of the major trading houses have also been active, with Trafigura reporting a strong end to the year and increasing their stake in the largest global zinc producer, Nyrstar, to 15%. This illustrates the major trading houses’ transition from middlemen to becoming vertically integrated groups that cover production, logistics, trading and processing. The major energy player set up by ex-Sempra executives, Freepoint Commodities, entered the physical base metals markets in Q4 by launching a desk in Singapore to capitalise on the increasing demand in China. It has been growing the metals business since acquiring the JP Morgan concentrates unit, in 2012, led by Philip Bacon.

Key Market Moves --

Following cut backs at Société Générale IAN OXLEY left after 15 years at the bank where he was most recently a Senior Base Metal Trader.

Former JP Morgan physical copper trader IVAN PETEV has joined Macquarie to run the global copper book from Singapore. This follows the Australian bank’s continued efforts to develop their presence in the physical markets.

WILL GAYNER also joined the Macquarie metals team from JP Morgan in their London office.

Mercuria decided to hire only one of the former JP Morgan metals team. JONATHAN BERCHOLE has joined in London to trade aluminium, tin and nickel.

ANDREW MCCLELLAND has joined Société Générale for a third time as a Base Metal Options Trader. He was last at the bank in 2012 as a Precious Metals Options Trader.

Gunvor hired MIKE HARRISON from Mercuria where he was for a year. He is based in the UAE and responsible for copper across EMEA.

RORY MCVEIGH has returned to Commerzbank as a precious metal specialist.

Following restructuring at Barclays during last year, they name ABHISHEK DALMIA as Global Head of Precious Metal Options based in their Singapore office.

MIKE FRAWLEY joined Cargill in the US as Managing Director of global metals. He joins from Jefferies where he spent a number of years. His role is to lead the group’s efforts in buying and selling industrial metal derivatives.

TRISTAN BUSCH, formerly with Trafigura as Global Head of Metals Trading, has joined Mercuria as Head of Metal Trading. 9

BULK COMMODITIES The bulk commodities market has been relatively quiet over the past few months, with the collapse in prices and continued low demand from China impacting most industry players. Anglo American has been particularly exposed and is preparing for a significant decrease in the value of their overall operations.This is mostly due to iron ore being their biggest commodity, with a 4% drop in iron ore taking it to its lowest levels since 2009. Decreased demand across the physical coal markets has been evident across most major trading houses triggering organisations like Peabody to cease all coal operations and Noble restructuring across the whole of its bulk commodities function. However, in contrast to the physical markets there has been some considerable activity in the coal derivative market, with the CME group advising that volumes are up by almost 15 times. Steel prices have continued to fall over the last few years; this is primarily due to weak demand caused by the macro economic conditions in developed economies and oversupply. The US steel market is still moving reasonably well, particularly across tubular products servicing the Oil and Gas industry, which now accounts for 29% of the domestic market. Also, Tata International has announced the acquisition of Portland based Totem Steel, with the intention of expanding their US coverage.

KEY MARKET MOVES --

Noble have hired MATT SCHICKE as Head of US Coal, leaving his previous role with Mercuria.

NICK WYKEHAM-MARTIN has joined Fednav Limited in Singapore as Senior Chartering Manager.

Vattenfall have hired MATTHEW MOORE, ex-Cargill, as a Senior Physical Coal Trader in their Amsterdam office.

KEVIN MAO joined Macquarie as Dry Bulk Trader in London. He was previously with Credit Suisse in New York.

CHRISTIAN WOLFENSBERGER, co-Head of Iron Ore has left Glencore.

Enerfo has hired STEVE WEINSTOCK, ex Armajaro within their Shipping Operations team.

JUNJIE CHEN has joined HC Trading as Trading Manager from Holcim Trading covering bulk commodities and raw materials.

PETER BRADLEY, Head of Coal Trading with Goldman Sachs in London, has reportedly left the bank.

S O F T A N D AG R I C U LT U R A L C O M M O D I T I E S The last few months have seen several businesses enter the agricultural markets, including BayWa Marketing & Trading International B.V. founded by the BayWa group. This division was created to focus on the grain business covering Feedstuff and Food industries in the MENA region â&#x20AC;&#x201C; working alongside their other subsidiary Cefetra exploiting their existing resources. ADM have been one of the most active in the market after selling their cocoa business to Olam. ADM also announced the acquisition of Specialty Commodities, a leading distributor of healthy ingredients. The group will integrate into the ADM Wild Flavours and Specialty Ingredients division; with the aim of further shielding themselves from unsteady crop prices. ADM have also increased their stake in food commodities rival Wilmar, as the firm increases trading volumes outside of their traditional focus within the US. Bunge has announced the move of the majority of its London operations to their Geneva offices to streamline trading operations and move the group closer to its European grain trading hub. However, the dramatic rise in the Swiss Franc could significantly increase the costs of the move adding uncertainty to their ability to retain and reward staff in the next 12 months. Within the cocoa market, the CME group have launched their cocoa futures contract in Europe. This launch represents the groupâ&#x20AC;&#x2122;s first entry into the deliverable soft commodities market. Rumours indicate they are also planning to launch into trades dominated by the U.S dollar giving customers cost effective and efficient services between the regions. Trayport, known as a leading provider of energy trading solutions, have also expanded into the agricultural markets with new offerings within European Rapeseed Oil markets. Finally, there remains uncertainty at commodities giant Louis Dreyfus over their vacant CEO position. The firm announced in late December that Mayo Schmidt will not become CEO, following a disagreement over terms and conditions, after an 18 month search process.

Key Market Moves --

PAUL BAILEY has joined Export Trading Group from his previous role with Armajaro in the sugar division.

Louis Dreyfus has added to their fertiliser team in Switzerland with FEDERICO THOMPSON joining from Noble.

MARCELO ROSSETIM has joined CGG in Brazil as Head of Corn and Wheat Trading.

Mekatrade has taken on QIAO XU from Aries, where she was the Fertiliser Manager for China.

FLORIAN ZEUNER has joined Cargill as a Palm Oil Trader from a background trading in metals and bulk commodities.

BTG Pactual are still making additions to their global agricultural team, CHRIS BIRD has recently joined from Cargill as a Global Grain Trader in their Switzerland office.

ROBIN SHU has moved to Golden Agri from JP Morgan as an Oilseeds Trader covering the Asian markets.

It is rumoured that JATIN CHOHAN is due to start with ED&F Man as Global Operations Manager based in their London office.

Another new addition to ETG is DANIELE MAROBIN, previously with MAG commodities as a Grains Trader.

GUY WILLIAMS has left ED&F Man where he was Head of OTC/ Structured Product Trading. Williams has been replaced by MICHAEL ORTIZ in Chicago, who was previously with INTL FCStone.

NG TZE HOU, a Grains and Oilseeds Trader at Cargill, has moved to Toepfer/ADM.

NICOLAS BENZAZON has joined Ameropa as Head of Sulphur from his previous position as General Manager of Sulphur at Interacid Trading. 13

COMMODITIES BROKING During a difficult period for the commodities market the broking space has proven particularly competitive, with brokerages trying various methods to differentiate themselves from their rivals. Several firms have been looking to increase their market data and research offering to clients, while others have looked to diversify and grow into emerging commodity markets, such as physical LPG, due to the anticipated shale boom. It has been a continued period of change for major brokerage ICAP, with the closure of their London soft and agricultural desk, followed by news of planned expansion into the dry bulk and energy markets in Asia. This has gone against the market trend which has seen a number of competitors downsize in Asia, due to decreasing trade volumes. Emerging brokerages seen to be hiring have included China Merchant Securities, who have continued the build out of their global LME platform, and Socius Group, who are in the process of setting up their London office to complement their established Asian iron ore platform. The last few months have been dominated by several high profile acquisitions within the broking space. Tullett Prebon completed their purchase of PVM at the end of 2014, while BGC looked to move ahead of the CME in bidding for GFI Group late in January. With no deal finalised, it has been an intriguing battle between the two firms, each with differing interests towards the GFI business. The acquisition of their technology and overall platform would enable the CME to speed up growth into the European energy market, whilst BGC are interested in the interdealer brokerage business and potential growth to their existing client base. As with any acquisition, uncertainties could mean several brokers from either company look towards new opportunities, opening the market for competitors to capitalise on.

Key Market Moves --

ICAP has hired CARSTEN EASTMAN, most recently with Oil Brokerage, as a Fuel Oil Swaps Broker in London.

PETER BARROWCLIFF has left his position of Global Head of Metals at Newedge.

Socius Group has hired MARTIN EVANS, previously with the CME, as head of a new Iron Ore desk in London.

RJ Oâ&#x20AC;&#x2122;Brien has hired KEVIN DANCA and MICHAEL CONNOLLY in New York to build out a Precious Metals business.

YVONNE TANG has joined China Merchants Securities in Hong Kong as Vice President of Global Commodities.

LCM Commodities hires Simon Butler from Bank of America Merrill Lynch to develop their metals brokerage business from their London office.

DEAN SEACOMBE, ex-ICAP, is now Director of Dry Chartering at LMB Chartering, a joint venture between Lightship and Maersk.

Starfuels have hired sugar trader PAUL BAKSH in their Geneva office to help develop their physical sugar business.

PVM have hired ED BRATTON, previously Head of Carbon at Gazprom.

ANDREW KENT, who spent 16 years at ICAP, has joined Tradition in London to expand their UK Gas business.

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