Coal Trading
Hi everyone! I was offered an ops role at one of the trading houses for the coal desk (think glencore /trafi /etc.). Would like to hear your opinion on the prospects of coal in the next 10-15 years. Though everyone is focusing on shifting away from fossil fuels, the last 1-2 years taught us that we as a society are still very reliant on them. Drawing on historic example of the shift from whale oil to kerosene that took 60 years-ish, I still think that the runway for coal is still quite long, though I'd love to hear your opinion on this.
The folks I talked to promised me that they would consider me for a junior trader role 6-12months into the job (typically one would take on a more commercial role 3-5 years after grad). It would also be great if you guys can shed some light on the typical comp for an ops role at a developing country for big trading houses (would it be in line with SG, US, UK, Swiss offices?). A reading list recommendation would be wonderful as well for me to enrich my knowledge on the logistics side of things.
I dont know about the future of coal, but take the offer bruv. Glencore/Trafi/Vitol are all big names worth carrying on your resume
I agree that it would be a very good opportunity for me, regardless if I decide to stay in coal for the long run or shift to another bulk commod
If my assumption is correct on the role and the company then I would say take it. Don’t expect great money while you are doing Ops but enough to live and survive in the country (which should be very low cost of living).
The opportunity to get into trading especially in coal or hard commodities is not linear. Most traders in this industry generally come in with mining backgrounds from producer shops. If you have good commercial sense at said shop the trading seat will come naturally. I can say this with conviction because I know personally someone that did it with said company.
Trading base salary will be modest regardless of Glencore or Traf, but bonuses are where you make a buck if you are good.
yeah that is what I feel as well. I think it is rather obvious which company I am talking about haha. With regards to the comp, I am aware that traders make the bulk of their money from PnL splits in trading houses (should be around 10-15%). What commodities are you dabbling with if I may ask?
Mainly dirty bulk products (mineral ores/concs and coal) without getting too specific
I see. Do you have any tips on how someone doing ops can take a more commercial role? Also, given the low liquidity of coal futures, how would you go about hedging a trade or do you mainly just do back to back deals? Would it be possible to profit from paper trades by leveraging the physical flow in coal like in oil desks?
I’d go about learning as much as possible and perform the job well. Learn about various coal specs, and understand why the trader negotiates certain terms out of the norm. The commercial aspects will start to make sense and you can understand why things are done in the way they are.
You would be exposed to many facets of the supply chain, commercial contracts, and emails filling your inbox over 100+ per day. Learn to keep on track of everything.
I’d be willing to take a person to the next stage as a junior trader if they showed a capacity to do more and being reliable/dependable.
To your second point, it depends on the terms and risk involved. It is situational where sometimes your bid and offer aligns without any price risks and you purely profit by the spread. Other times you might buy on fixed price and sell basis index plus and hedge your exposure on the short. All down to the groups risk model, and whether or not you can convince them to support your view. Otherwise they will only authorise you to back to back deals.
Last question, yes, and similar to my last point if they support your view.
yup if i recall china is commissioning 2 plants per week
Coal has no future and is basically kaput, it is not easily traded in most markets and is more of a producer style business. But, the guy who runs that team also runs LNG/Power and overall the team is expanding. This is one of those take bad job now with a top firm to move seats later.
I’d disagree on not easily traded. If anything with the lack funding to new mines the trading market is growing, and coal still has more active counterparties than other dirty bulks - not uncommon to see a cargo traded 5 times before it gets to an end customer in the thermal market.
The future is metcoal and a producer’s game. I don’t see it dying anytime soon. Thermal conversely has an expiry date but whether it is 10 or 20 years is unknown but I have a bullish view regardless.
I also would like to add on the possibility of making syn gas to produce useful chemical derivatives in the future in countries such as Indonesia and China. Though it is expensive, from what I have gathered, the Indonesian government aims to be self-sufficient with regards to these chemical primers given that agriculture is a big part of its economy. The domestic reserve from which these fundamental primers are traditionally made from (natty and oil) are only 10-15 years at best.
As highlighted above, metcoal/semi coke is still an integral raw material for steelmaking and the nickel extraction industry that could not be replaced yet with the current technology due to its unique physical properties. Although it only accounts for a small part of coal, this aspect could not be undermined.
Given the tight funding available for new coal plants and fluctuating demand (effect of net zero by 2050 and energy security concerns on the other hand), volatility would be rather high and I think it would be an interesting space to be in. Indubitably fossil fuels would have to go at some point but I think the runway for coal is still enough to last me for my career (10-15 years into the future).
Impedit ab ea dolores et quam in hic. Ut vero distinctio natus accusamus necessitatibus id laudantium accusantium. Ipsum sed error dolores dolores aperiam est corrupti. Et assumenda sint cupiditate itaque eligendi. Porro ducimus nesciunt ipsa voluptatem aut quas.
Quia dolorum vero voluptatem dicta est deleniti qui. Veniam quam fugit facere quos. Dolorem commodi illo fugiat ut a nobis iste.
Incidunt accusantium accusamus accusamus ipsam et ullam. Aut corporis sit architecto nobis aut velit. Quia et consequatur nemo perferendis rem excepturi sapiente. Enim sed quia minima.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...