* Bonuses down; paucity of new jobs for iron ore traders -
* Banks curbing commodities trading due to regulatory
* Some trading firms have expanded iron ore ops, but
By Manolo Serapio Jr and Silvia Antonioli
SINGAPORE/LONDON, Sept 10 With China's
insatiable appetite for iron ore cooling alongside a slowing
economy, once in-demand traders of the steelmaking raw material
face a new reality: fewer financial perks and tougher resume
Anyone without a network of connections in top market China
need not apply. And the days of guaranteed bonuses to attract
the best talent are largely over. Just two years ago, iron ore
traders were the envy of even investment bankers, a famously
well-paid breed of financial players.
"Two years ago, banks were all over the market. If you could
spell iron ore, they wanted you in their team," said Paul
French, the London-based global head of commodities at
recruiting firm Global Sage.
Now, with iron ore prices retreating from a
record near $200 a tonne in 2011 to $134.80, recruiters say the
phones are not ringing like they used to.
"I haven't had a requirement for an iron ore trader for some
time. Eighteen months ago we were regularly asked about it and I
don't think we've been asked about it in the last 12 months,"
said Charles Crichton, Asia general manager at UK-based
"The boom of iron ore is not there at the moment to justify
paying someone a large amount of money in order to get them
across the line because they're never going to make it back for
Iron ore became the new pot of gold when a shift away from
four decades of annual pricing to a shorter, spot-based system
in 2010 opened the door to more players.
At the same time, stimulus-led economic growth in China
after the global financial crisis helped ramp up demand for the
raw material, driving its price to an all-time high in February
Traders of the raw material, the commodity most closely
linked to China's fortunes, became among the best paid and most
sought after in the trading community.
While the basic salaries are mostly unchanged, the
performance-related bonuses are on average lower than they used
to be and guaranteed bonuses are now a rarity, recruiters said.
The average annual compensation at banks and trading houses
for a mid-level iron ore trader is a basic salary in the range
of $150,000-$200,000 plus an average bonus of 10 percent of the
profit the trader makes for a company, according to a recruiter.
A top role such as global head of iron ore at a bank could
fetch a salary of about $400,000, and a bonus including cash and
stock of as much as $1.5-$2 million.
SHAKEOUT IN THE RANKS
As China's economic growth has slowed in the past two years,
iron ore prices have dropped. In September 2012, they slumped to
a three-year low of $86.70 a tonne. This year, China is
targeting GDP growth of 7.5 percent, the slowest in 23 years.
And with no other country coming close to being able to
absorb the slack left by China, iron ore prices risk years of
decline as a major oversupply swamps demand, with some
forecasting prices to be cut in half by 2015.
Banks globally are moving away from commodities trading due
to regulatory pressure and shrinking revenues, leading to a pool
of surplus traders and a shakeout in the ranks.
Earlier this year, Deutsche Bank steel trader Geoff Arnold
left the German bank. Tom Baldwin, the bank's iron ore trader,
has also left to join BTG Pactual, sources said.
Two iron ore traders at Macquarie have left to join the
mining division of top steelmaker ArcelorMittal, although the
Australian bank says it is still committed to trade iron ore,
according to industry sources. ArcelorMittal and Macquarie
declined to comment.
JPMorgan said in July it would seek strategic
alternatives for its physical oil, gas, power and metals trading
division, and Morgan Stanley is said to be exploring
options for its commodities business. French bank Natixis
said last month it has agreed to sell its London-based
commodities brokerage to Chinese brokerage GF Securities.
The changed landscape means iron ore traders are finding
themselves in a buyer's market.
"When the banks came in they were able to pay traders a
two-year guaranteed bonus. That was common and now it is really
hard to get," said Richard Usher at London-based dry bulk
commodity recruiter CFI search.
TRADING FIRMS WEIGH SITUATION
To be sure, major trading companies such as Cargill and
Trafigura are still in a hiring mode. Cargill, which trades
around 50 million tonnes of iron ore a year, is looking to add
two to three more staff in its physical trading business that
already employs 13-15 people in China and Singapore, according
to a source familiar with the company's plans.
And in the past year, two of the world's biggest oil
traders, Vitol and Mercuria, have expanded into base metals.
But even trading companies are reassessing the situation
given the increasing challenges in China.
UK's Stemcor, the world's largest independent steel trader,
for instance, is restructuring its business and cutting some
jobs in response to weak market conditions
Iron ore traders may still be able to secure jobs today that
pay a basic annual salary of $150,000-$200,000, but only those
with 5-6 years of work experience and a network of buyers in
China, said a Shanghai-based trader.
"Today you need to have people who are very well connected.
If you have China-related experience then you have good demand,
if you don't then you're dead meat," the trader said.