Metals/Coal Marketing/Origination

I'm currently working part-time for a small equity research outfit that has its own tiny L/S fund but I've been looking to get into physical commodities for a while. My background is a BA in International Relations in the US and an Msc. in Finance in Europe.

It's probably foolish for me to want to be too specific at this point but I'm most interested in coal/metals/ores (stuff that's mined). Long-term, working on an origination/business development team for a big commodities house like Noble/Trafi/Glenstrata or a big miner like BHPB/Anglo/Teck would be awesome. I'm just at a complete loss on what to do to break in. I have precious few contacts in the industry and since I'm not Australian/South African, getting into a grad program at one of the big miners is essentially mission impossible.

From BOT's awesome ag Q&A, I can see that working as a merchandiser at a country elevator for one of the ABCD is a good way to get your foot in the door for ags. Is there anything similar for metals/coal that doesn't require an engineering degree?

 

Just wanted to second this. Though I'm starting out in the energy industry, I've always wondered how metals folk got their start...

My complete neophyte's knowledge on this...I've seen trader's assistant jobs out there in metals before... but I don't know if those are unlikely to lead to actual trader positions as BOT described in his ag AMA... Also I think I've seen some Canada mining firms/opps (from what I understand most of the big gold mining companies are headquartered in Canada).

 

Well to be more specific, dry bulk steel raw materials like coal or iron ore. It's the volumes, the importance of the logistics element, the crucial role they play in basic industry as well as the desire to be in something a tad more niche than crude/products. The cyclical nature of the space is tricky (especially right now) but these physical markets have been around in one form or another for centuries and barring some radical technological innovations, will be relevant for decades to come. They have been the final frontier for derivatives (met coal is still waiting on those).

I'm open to other commodities for sure but if finding a first job means working around an asset in the middle of nowhere, I would like it to be something I'm pretty stoked about long-term.

 
Best Response

Well, most people want to do metals or oil because they have the most visibility, and people assume that there is a correlation between NPV of future comp and market size. Which is only true to an extent. Metals and oil are so big and concentrated that there's a lot of people not making much money (especially on the hedge fund side).

If what interests you is physical commodity trading, ags are a much better way in, simply because there is less competition, and it's a more fragmented and opaque market with more opportunities to make money even if you're not called Marc Rich and operating in the mid 20th century. If you don't like ags after trying them out, you can always transition to the metals desk of one of the bigger groups. It will be a weak/tiny player, often, but it's a foothold into the industry, from which you can get poached. But I really think you'll learn more as a beginner negotiating 30k USD deals with coffee buyers in the Middle East than checking freight contracts for spelling mistakes at Cargill.

Why is this important? Well, you get 100 candidates and 90 tell you "ever since I learnt to speak I wanted to be in metals" which really means "I've read Marc Rich's book and I want to be King of Ore". And the remaining 10 talk to you about cotton basis and the crush margin on oilseeds being inverted by Chinese real estate speculators. 90 ask you about compensation, 10 about the learning and training. If you haven't yet, read "Merchants of Grain".

The other reason to do ags over oil is that most of the big oil players have IPOed or are insignificant. Your max upside at Glencore is low 7 digit/year, but several billionaires were made when the place IPOed. Not all the ABCDs are publicly traded, and at some point some of them will float - when that happens, you want to own a decent chunk. That's how you'll make most of your upside, not from your yearly cash. This is a less risky variation on "the only way you'll make real money is by starting your own place".

If I was trying to break into the industry today, I'd try Geneva. It's a hub ("the" hub), but it's also one of the most boring places to live in the world (unless you're really into the outdoors). Expensive, grey, closed to outsiders, not much to do. So people tend to leave when they can, unless they're more senior and enjoy this suburban life in the mountains. This gives you an edge vs London or Connecticut (although I hear friends in CT compare it to Geneva :P). Ampersand is the main headhunter, at least it looked that way back in the days. Also hit up the smaller traders like Armajaro or Libero. My advice is probably out of date, it's been years since I left the industry. Also, during the commodities boom we saw a surge in applications from finance people (who traditionally looked down on commodities traders because, you know, prestige and all) so things might be a bit more competitive.

 

No idea. It was a pretty closed world and every firm has a different culture. We were a hell of a lot more relaxed/family like (think GS pre-IPO) than Cargill, for example - every time I met Cargill guys for drinks in Geneva it was like talking to a bunch of accountants (in that they were so damn corporate).

The thing about careers is that if you get things done, people will hear about you and opportunities will open up. Lugano is better to live in than Geneva, I think. At least it doesn't pretend to be a city, and doesn't have French crime rates. And I bet salaries must be interesting.

 
GoodBread:

I'm currently working part-time for a small equity research outfit that has its own tiny L/S fund but I've been looking to get into physical commodities for a while. My background is a BA in International Relations in the US and an Msc. in Finance in Europe.

It's probably foolish for me to want to be too specific at this point but I'm most interested in coal/metals/ores (stuff that's mined). Long-term, working on an origination/business development team for a big commodities house like Noble/Trafi/Glenstrata or a big miner like BHPB/Anglo/Teck would be awesome. I'm just at a complete loss on what to do to break in. I have precious few contacts in the industry and since I'm not Australian/South African, getting into a grad program at one of the big miners is essentially mission impossible.

From BOT's awesome ag AMA, I can see that working as a merchandiser at a country elevator for one of the ABCD is a good way to get your foot in the door for ags. Is there anything similar for metals/coal that doesn't require an engineering degree?

The most common path to trading concentrates and ores is through the traffic dept. You get a job doing operations / traffic for a trading house. You do your job well; show that you are efficient, precise, intelligent, can think on the spot, and are willing to go the extra mile (this job is 24/7; you can take that work/life balance shit elsewhere). On top of this, you demonstrate commercial knowledge / acumen beyond what would be expected from an ops guy (basically, read all the trade press, think of ideas and plays). This will get you on the radar for the commercial fast track.

Lastly,you get a trader to like you. Become his friend. Go for drinks. Metal trading shops are small operations; recruitment is handled by traders, not HR.

If above is not possible, get a job at a producer or consumer. If BHP and Anglo is tough, don't sweat it. There's thousand of mines, smelters and mills all over the world. Think of how human-capital-starved natural resource operations in 3rd world jurisdictions are (try finding a decent mkting mger in Papua New Guinea...). A non-target US degree is considered an HBS MBA in some of these places... If you are shooting for a trading house role, 3rd world experience is considered INVALUABLE. Who do you think Glencore would prefer; some guy who spent a couple years within a jr role at US Steel's procurement dpt in Pittsbrugh, or a kid who spent a year marketing the output of a tin mine in the DRC? I'd say the latter.

Anyhow, working for a producer / consumer will help you understand the market, build a network, and understand the mentality of your future counterparts. Additionally, you will be negotataing directly w/ traders; what better way to show off your trading potential, right?

The 3rd route in, and a bit more of a long shot, would be to gain operational experience within one of the different firms whichi provide services for traders; trade finance dpts at banks, futures brokers, ship brokers, even warehousing firms or quality surveyors. This will allow you to come into contact w/ trading houses (though most of your contact will be w/ traffic people), and should give you transferable operational knowledge.

Hope above helps.

 
GoodBread:

Great stuff thanks! I'm seeing that the biggest hump is convincing people I can do operations/traffic type work. A recruiter in the US said my resume made me seem like a front-office person, which is great in some respects but not necessarily helpful in the physical world.

To which you should have responded something along the lines of " and front office is where I would like to eventually end up, but I firmly believe in the benefits of learning this biz from the ground up, which is why I am applying for the traffic job blah blah"

 

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