LAUSANNE, Switzerland, April 1 Global
commodities trading is undergoing profound changes as banks pull
out from the sector while trading houses adapt to new
regulations and expand into physical assets.
Top executives and co-owners of some of the world's largest
trading houses discuss new trends at the FT Commodities Summit
in Lausanne, Switzerland this week.
The following are some of their comments at the event.
ANGLO AMERICAN CEO MARK CUTIFANI
On private equity in mining:
"At the end of the day, (private equity firms) will be
making pointing bets. There is still a lot of risk associated
with those bets. The assets that are being sold are probably not
the best assets in the portfolio. You are taking narrow bets on
potentially difficult commodities. You have to be very good to
be successful. And in this market that is a bit choppy, it gets
a lot tougher. The risk that they are taking on this is a lot
"We believe that compared with the manufacturing sector, we
started 20-30 years behind that sector ... What Toyota did in 50
years, we have got to do it in three."
SWITHUN STILL, DIRECTOR OF SOLARIS COMMODITIES
"In Russia, Kazakhstan, Ukraine, I think the temptation of
creating state grains champions will be too big to resist ...
But a grains OPEC seems to me like pie in the sky. I don't see
On sanctions against Russia over Ukraine:
"I do not expect sanctions to hit the grains market. The oil
market brings in a week the same revenue (to Russia) that the
grains market brings in a year so if they are going to target
anyone it's going to be oil and gas and a couple of banks, it's
not going to be the grains sector."
Still said that although it was not business as usual in
grains ports such as Sevastopol, flows of grains continued and
headlines about an upcoming grains price rally were overblown.
"Yes it has been disrupted but I think the whole thing was a
GLENCORE XSTRATA CEO IVAN GLASENBERG
On whether private equity will do well in the mining
"Now there are a lot of private equity guys starting
companies, a lot of guys who left the industry and started
private equity groups ... It's never worked in the past ... The
problem, I think, with private equity in the past is that to get
return you had to have massive gearing. And the problem with the
commodity space, if you have a high gearing, is that you are not
running Boots Pharmaceuticals, where you have a pretty constant
earnings base. (In mining) you just don't know your earnings
base. When you hit bad times, like we did recently, it goes down
like that. And how are you going to feed your debt?"
"Unfortunately you have to shut mines if mines are not
profitable. We are working for shareholders. We have got to do
the best we can at our operations to make sure we are not
overspending ... You have to understand the market, you can't
just sit there in a cocoon and say 'I am going to overproduce
because I am cutting my costs'. You have to look if demand is
"Greenfield has stopped," said Glasenberg, adding that this
should help support commodities prices. Curtailed production
will gradually lead to a spike in commodities prices a few years
down the road. Then the new cycle will come when miners start
investing in greenfield again, he said.
"If we wait a bit longer (during the next cycle), the
Chinese might say we had better go (invest in mining) ... They
haven't done it so far, we did it for them."
BUNGE LTD CEO SOREN SCHRODER
On whether Chinese trader COFCO's acquisition of assets in
origination business will change the market:
"I think it is wholly consistent with the food security
strategy of the Chinese five-year plan. It makes all the sense
in the world that COFCO China wants to be connected somehow
directly to the source. My view is that COFCO will continue to
buy and transact with all commercials in addition to these.
China is bigger than one or two companies. But it is a way to
deal with the fact that they no longer are claiming to be
self-sufficient. It is a shift, but I really doubt it will
dramatically change trade flows overnight."
CHRISTOPHER DELBRUCK, CEO OF E.ON GLOBAL
"I am pretty confident there will be no interruption on
energy flows from Russia to Europe. It has not happened in the
last 40 years. People omit the fact that there are 60 million
tonnes of coal brought into Europe and there are (many) oil
barrels coming in. Those two commodities play a role."
NOBLE GROUP CEO YUSUF ALIREZA
On whether trading firms should adopt a more hybrid model,
becoming involved with financing and buying assets too:
"None of us should be arrogant enough to assume one model is
right and one is wrong. As a CEO you need to decide what model
is right for your firm and have conviction in that view. From a
Noble perspective, our core competence is in the middle part of
the supply chain ... We are not miners, we are not farmers, we
are not a bank ... so our model is to partner with those guys
rather than compete with them."
PAUL REED, CEO OF BP SUPPLY AND TRADING
On financial regulation:
"The threat to business can be quite significant if we get
it wrong," he said, adding that higher capital requirements were
one of the biggest worries as they tied up vast amounts of
additional capital for trading purposes. If interest rates went
up around the world, this may reduce the ability of traders to
hold sufficient stocks and that could become a threat to
stability of supplies, he added.
VITOL CEO IAN TAYLOR
On Russia-Ukraine crisis:
"Some of us are old enough to remember the end of the Cold
War days. In the energy space, gas and oil have tended to
continue to flow because it is in the interest of both sides
that they continue to do so," he said, adding he was more
concerned about instability in the Middle East and a shutdown in
supplies from Libya.
GUNVOR CEO TORBJORN TORNQVIST
On Russia-Ukraine crisis:
"It is business as usual at Gunvor ... Russians are very
pragmatic. Business and politics are much less integrated than
you may think ... The current (Ukrainian) crisis will be
MARCO ALVERA, SENIOR EXECUTIVE VICE PRESIDENT AT ITALIAN OIL
MAJOR ENI, RESPONSIBLE FOR TRADING
"Certainly shale gas is something Europe should do as
opposed to resist. And we probably need to convince some of our
suppliers that if gas prices do not come down, demand will
disappear. Every new coal-fired power plant in Europe means
fewer Russian jobs for decades. Europe collectively is in a
stronger bargaining position than we think."
"There is shale gas in Ukraine. The cycle to bring it to
production is three to four years. There is also conventional
gas. There are opportunities for conventional gas in Ukraine
that were planned to be exploited before the crisis ... There is
not enough gas in Ukraine to shift the energy balance in
"On gas, we have potentially a much more serious problem in
supply disruptions in Europe because of the Ukrainian situation.
In relative terms the gas disruption is more serious than the
oil disruption because it is much larger ... It is 30 percent of
PAUL CONWAY, CARGILL VICE CHAIRMAN
On Chinese appetite for agricultural commodities:
"The issue is scale ... In the next 10 years, they (China)
could easily be the world's largest importer of corn and wheat."
JUAN LUCIANO, PRESIDENT AND CHIEF OPERATING OFFICER, ARCHER
DANIELS MIDLAND CO
"We don't have assets in Russia and this is something we
want to correct over time."
He said ADM has assets in Ukraine, including facilities in
the port of Odessa, a crushing plant and a small unit in Crimea.
On Ukraine, he said: "We have had no problems so far ... So
far, so good," adding that good weather had allowed crop
planting there to go ahead of plan.
"We see the global economy actually accelerating in 2014
and 2015, driven mostly by the most developed economies ... and
probably emerging markets broadly flat."
"When we look at the U.S. economy we see the fundamentals
very solid - low inflation rates, we see a resilient housing
market and actually we see some strength in industrial activity
driven mostly by the energy revolution in the U.S., which is
bringing a renaissance in the U.S. and not only in the Gulf
Coast but also in the northern part of the U.S."
"In the case of China, they have just abandoned the
objective of self-sufficiency in grain, which I think is a smart
thing to do, because I think it's taking too much of a toll on
their resources. China has 20 percent of the global population
... As I think of them relying more on global markets, it makes
sense that they have a strategy to have a higher ability to
acquire, to originate grains around the world and trying to
invest in infrastructure to facilitate the movement of grain
because at the end of the day they are going to be an importer."
(Reporting by Silvia Antonioli and Dmitry Zhdannikov; Compiled
by Dale Hudson)