LAUSANNE, Switzerland, April 2 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 made on Wednesday
at the event. For selected comments from Tuesday, click on
PIERRE LORINET, CFO, TRAFIGURA
On the rise in interest rates:
"As long as interest rates remain within that (reasonably
low) range, you will be factoring it in the cost of doing
business and eventually it gets through the chain to the
GUILLAUME VERMERSCH, CFO, MERCURIA
On interest rates:
"If you see interest rates growing, that means that the
underlying economy is effectively recovering. That means more
volatility, more flows ... that means more capacity to borrow
from different markets".
JEFFREY DELLAPINA, CFO, VITOL GROUP
On interest rates:
"Just a natural move higher in Fed funds from 0.25 (percent)
even up to 2 percent won't necessarily hit the business or make
us uncompetitive. Some of that will be factored in the cost of
transaction, inventories etc."
On the next big mergers in trading:
"It is difficult to merge cultures. I don't see this
happening as quickly as you might think."
On U.S. oil refining:
"We would love to invest in U.S. refining ... The ability to
enter there is just way too costly."
On banks exiting commodity trading:
"I don't think it's a great thing because I think they have
tremendously activated interest in the commodity space
especially through the institutional investors market, through
the structured products market and that just creates liquidity
all along the curves. And to sustain growth with the least
amount of risk, we want liquidity in these markets, so we are
not particularly happy about it."
On Vitol buying Shell assets in Australia:
"I don't feel there is a price bubble at the moment in Asian
and European energy assets just yet."
On whether Vitol is looking into a listing:
"I think we do periodically revisit the issue because it
does deserve attention but I think we have convinced ourselves
that the model we have had for a long time seems to work very
well for us. We are not constrained capital-wise at the moment
and I don't really foresee any of our plans being interrupted by
a need for more equity capital. And we have a number of
co-investors that are happy to look at other large investments
with us so I don't think we need to go that route for a while."
VINOD AACHI, GLOBAL HEAD OF STRUCTURED TRADE FINANCE AT
STANDARD CHARTERED BANK
On challenges of Basel III capital standards:
"Glencore and Vitol will manage the costs (of Basel III) but
smaller players will be left to the mercy of the market."
GRAHAM DONNELL, DIRECTOR & GROUP GENERAL COUNSEL AT STEEL
TRADING FIRM STEMCOR
On the company's restructuring:
"The standard response to a stress scenario, a default, is
to go into what is called a standstill. But trading companies
can't stand still. They need to move. They need to keep the
bicycle wheels turning. So that was a huge challenge for us. We
defaulted on one facility, cross defaulted incredibly quickly
into all our other facilities and we had to keep the diesel in
the engine and it was the relationships with our trade finance
lenders: HSBC, BNP, Natixis that pulled us through that because
what you need is a coordinated group that you can talk to and
come to a consensual solution."
"When I asked my CFO before I came to this panel what was
the lesson (we learnt), he said: fewer banks, stronger
relationships. We did the reverse."
MARCEL VAN POECKE, MANAGING DIRECTOR AT CARLYLE
INTERNATIONAL ENERGY PARTNERS
"Why is there a fit between private equity and commodities
traders? Capital is very important for traders, especially who
are not listed, diversification and access to top-tier operators
is also important".
"I've never seen the market with so many good assets for
sale," said Van Poecke, adding that those assets are being
offered as major oil companies are refocusing and independent
producers are expanding.
"Investors say 'We don't need you to be an integrated
company' ... They say: 'We can buy BP for upstream and Valero
"My guess is that private equity is becoming a bigger
business in oil and gas. You will see more sovereign wealth
funds and other capital coming in and looking for
(Reporting by Silvia Antonioli and Dmitry Zhdannikov; Compiled
by Dale Hudson)