Oil traders move into metals

In parallel with the expected departure of Kylian Mbappé to Real Madrid, another, more discreet transfer window is taking place. For several months, the largest oil and gas traders on the planet have been jostling to recruit star traders from the world of metals, and fueling an assiduous chronicle of these movements by specialized newspapers. Independent multinational brokerage Vitol has hired iron and aluminum experts, reports Bloomberg. Another big fish in the sector, Gunvor, is recruiting experienced traders from IXM and Traxys, firms specializing in metals trading. Mercuria also aims to strengthen its position in metals and could recruit a former Trafigura executive, according to information from Reuters.

Why this frenzy? Until then, major oil traders seemed little interested in anything other than brokering energy, often fossil fuels. It must be said that the demand for oil and gas has never been higher. And that their mastery of financial tools, coupled with arbitrage possibilities reinforced by the control of hydrocarbon transport and storage infrastructure, is enough to generate large profits.

But with the energy transition, “the world is turning to mineral resources, ores and metals», explains Yves Jegourel, professor and chair of raw materials economics and sustainable transitions at the National Conservatory of Arts and Crafts, and co-director of the latest CyclOpe report, published Tuesday May 14. Copper in electricity networks, aluminum to lighten vehicles, iron ore for low-carbon steel… Various resources are critical for the energy transition, and are at risk of shortage.

Exacerbated volatility

The return, or entry, of a certain number of energy traders into mineral resources is explained by their anticipation of profits, but also by the strong instability to come. The trader is the one who knows how to navigate volatility», underlines Yves Jegourel. If the prices of all ores are not going to skyrocket – copper, as such, is the only metal for which the future deficit is almost assured, judges the CyclOpe expert – their new role is enough to make them amenities of choice for players seeking diversification. “Tensions and instability give this “pure” trading function a strategic role», continues Yves Jégourel, praising the capacity of these players specializing in the optimization of value chains and arbitrage on futures markets, to “streamline the supply of metals at the best price“.

Nothing absolutely new. Since the start of the millennium, the role and profits of large trading companies (materials, oil or cereals) have continued to grow, tell journalists from Bloomberg Javier Blas and Jack Farchy in The World for Sale (“The World for Sale”, untranslated), a work published in 2022. According to the firm Oliver Wyman, the net margin of large materials traders (including oil and electricity from integrated gas plants) in the world has reached 105 billion dollars in 2023. An amount far from the approximately 150 billion reached in 2022 thanks to the Covid-19 pandemic, but almost 2.5 times higher than the profits earned in 2018. A new era, in which oil is still king, but where metals take their part. A role of “new black gold”, some say.

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