How hard is it to break into physical commodities trading
Currently, I’m finishing my first year at an EU target school, and a career in physical commodity trading seems very attractive to me. However, there are a few problems:
I am not an EU or UK national.
My GPA is around 3.3 because the classes are very memorization-heavy, which I’m not really used to.
On the bright side, I would say I’m quite good at online assessments. During spring week applications, I advanced far enough to interview with a real person at a quant firm. I also think I am good at trading (ranked in the top 10% in an invite-only trading event organized by Goldman Sachs on our campus, competing against both bachelor’s and master’s students). But I am not sure if my gpa will cause any troubles.
I’ve also seen people say that commodity trading is still a very traditional industry where you need strong connections and a work permit for the location you’re targeting. I’m not sure how accurate that is, though. Maybe roles in Middle East etc are more open to non-citizens. How are my chances considering all of these? Is it worth to pursue a career in this field in your opinion?
Breaking into physical commodities trading can be challenging, but it's not impossible, especially if you play to your strengths and strategically address your weaknesses. Here's what you need to know based on the most helpful WSO content:
Challenges:
Traditional Industry & Connections: Physical commodities trading is indeed a traditional industry where relationships and connections play a significant role. Networking is crucial, and internships or even short-term work experiences can help you get your foot in the door. Unlike investment banking, formal HR programs are less common, so networking and direct outreach are key.
Work Permits: Your concern about work permits is valid. Many roles in Europe or the UK may require sponsorship, which can be a hurdle. However, regions like the Middle East or Asia might be more open to hiring non-citizens, especially if you bring unique skills or experience.
GPA Concerns: While a GPA of 3.3 might not be ideal, it's not necessarily a dealbreaker. Physical trading roles often value practical skills, problem-solving, and a strong understanding of logistics and markets over academic performance. Your strong performance in trading competitions and online assessments demonstrates your potential and can help offset a lower GPA.
Strengths:
Trading Skills: Ranking in the top 10% in a Goldman Sachs trading event is a significant achievement. Highlight this in your applications and interviews, as it shows your aptitude for trading and decision-making under pressure.
Online Assessments: Your ability to excel in online assessments is a valuable asset, as many firms use these as part of their hiring process.
Interest in the Field: Your enthusiasm for physical commodities trading and willingness to explore opportunities in different regions (e.g., Middle East) show flexibility and determination, which are highly valued in this industry.
Recommendations:
Networking: Start building connections in the industry. Reach out to professionals on LinkedIn, attend industry events, and consider internships at firms like Nestle, Hershey, or Starbucks, which are major players in commodities like sugar, grains, and coffee. These experiences can provide valuable insights and contacts.
Internships: Even short-term internships or work experiences can make a big difference. As mentioned in WSO threads, once you have some experience, it becomes much easier to secure a full-time role.
Skill Development: Focus on understanding logistics, storage, and opportunity costs, as these are critical skills for physical traders. Additionally, learn about price discovery, market analysis, and the specific needs of buyers and sellers.
Target Niche Markets: Smaller firms or niche markets might offer better opportunities for someone with your background. These firms often value deep knowledge of a specific product or region over formal qualifications.
Consider Regional Opportunities: Explore roles in regions like the Middle East or Asia, where work permits might be less of an issue, and the demand for skilled traders is growing.
Is It Worth Pursuing?
Absolutely, if you're passionate about the field and willing to put in the effort to overcome the challenges. Physical commodities trading offers exciting opportunities, especially for those who can execute consistently, build strong relationships, and navigate the complexities of the market. Your trading skills and adaptability give you a solid foundation to succeed.
Sources: A few questions on getting started in physical trading, Physical Commodity Trading, Crude Oil trading at big oil exit opps
Your GPA will cause troubles; you should try to increase it. Take easy classes that can bring it up.
The hardest thing about physical commodity trading is that it's low headcount. There's a million grad jobs in finance, but only handful per city for physical commodities.
All you can do is apply and network for every opportunity you see. Occasionally you can find a gem opportunity where they don't put "trading" in the title for an entry level role. That's how I got onto a trading desk at an oil company with no prior experience.
You need backup option really, can't bank on having luck in physical commodities applications.
So I'll speak a bit from an American perspective.
GPA thresholds, I've seen usually the bar set at like 3.0 for the ABCD houses, but my guess is the unspoken bar is 3.5, so get that up.
In terms of straight-up difficulty, it does depend on the type of "program" that you're targeting. For the Grad programms/Trader Development Programs that are 1-2 years long and you rotate between essentially the entire value chain, from Ops, to scheduling to trading, these are some of the most competitive programs in the business, probably up there with like Bulge Bracket IB or S&T. BP and Shell draw a lot of their class from the UT Austin, Texas A&M, and U of Houston Petroleum engineering types. Up in Chicago, it's similar.
For the ABCD houses(They ship grain/ags), you'll see a decent amount of FFA(Future Farmers of America) high school kids who majored in like agroeconomics at Nebraska or Minnesota, and are more open to a lot of students because of the sheer size of the companies, albeit the amount of actual trading seats is small.
Can't comment on the Soga Shosa(Japanese trading houses), but I think they're pretty Japanese target school heavy. Your softs specialists like Sucden, Sucafina are also pretty private. Not sure if they even post internships regularly.
Like the comment below, it is really difficult to break into the industry straight into a seat from undergrad. Almost every trader I know started out in back office or middle office, or sometimes jumped over from an adjacent industry like commodity Finance at a agricultural focused bank like Rabobank, or from Freight Forwarding/Shipping.
Commodity trading is a more "traditional" industry compared to its S&T cousins, for better or worse, but it's not impossible to break into.
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