Physical Metal Traders: Where is the money?
I would like to ask all the physical metal traders on this forum, where is the money at in the metals realm nowadays?
What I mean by this is, where are margins? Concs, cathodes, billets, ingots, scrap? Which metals (base, battery, ferrous, precious)?
Last but not least, which companies pay the best, consistently?
Any color you can share is appreciated. Thanks!
bump
Paging GoodBread as I think he's the only metals trader on this forum
Yes GoodBread will best for this. I remember reading some of his comments from a couple of yrs ago when I was applying to some physical firms, very well-read guy.
Interned as trading analyst at metals trading shop last summer, Aluminum desk got the most capital allocation and they were shorting the shit out of everything at the time, particularly MWP. Work in gas now so idk what’s changed since last August.
I can narrow that down to a couple places lol. That MWP situation feels like a CFTC investigation waiting to happen.
How is aluminum priced in the US and Europe?
Fastmarkets and Platts call people up and ask what they would bid or ask for ali over LME, either inwh Rotterdam or delivered Midwest.
Wish I knew! Generally speaking not in stuff that is too close to the underlying on futures. Cathodes are not great, P1020 is dreadful. Concs can be very, very good, billets have decent commercial margins. But those are a lot less liquid.
The margins in metals are tied to barriers to entry and/or risk. Scrap has low barriers to entry but large seasonal swings and is way out on the risk curve - hence the higher margins. Concs has high barriers to entry, you need relationships with very large players.
Very hard to say what places pay best as the industries are small and people tight-lipped. It’s worth noting running your dept makes a huge difference in comp, which is understandable given you’re the one really running the risk.
Scrap feeds way more commercial people than primary metals fwiw.
There are also margins in dealing with smaller consumers, managing all the credit risk, less than truck load deliveries…
Thanks GoodBread! Question, what do you mean when you say scrap feeds more commercial roles? If you had to guess, would you say Glencore/Trafi are the places to be at? Or more so smaller shops like Hartree/Traxys/IXM etc?
There are way more scrap traders than primary traders. If you go to a conference like ISRI, there are hundreds of people trading or buying scrap that do well for themselves.
Glencore is way bigger than Trafi in North America from what I can tell. I get the sense Glencore will eventually become a metals company whereas Trafi will eventually become an energy trading company.
Hartree I never run into, Traxys is pretty small although they do do Cu Cons, IXM has potential, especially with their new CEO.
Most intriguing might be Mercuria. Former MG/Enron/Sempra/JPM/CCI team. Most of those guys are close to retirement. If you can become their protege, learn from them and convince Jaeggi to still allocate capital to you…
Rio Tinto is trying to move into more active trading. Asset base is top top class, they are pushing ESG and green premiums like crazy.
Obviously get second opinions about this but I think the best shops are either the really big guys, or the really small ones with their niches. A lot of those guys you mentioned are in that middle ground no mans land.
What do you suggest for a college sophomore who wants to get into metals? Unlike oil&gas, most of the big metal players' grad programs are tiny and reserved mainly for Oxford/UCL grads or Aussies & South Africans, so I'm struggling to find opportunities to break in
To your point, the industry is small enough there isn't really a typical path and many of the people in the field have some sort of family tie to it. Assuming you have a couple summers ahead of you, I would look to the scrap world and/or primary/secondary smelters. More jobs, need for bodies (especially smelters during the Summer - word of warning it will be brutal). A summer at a scrapyard or smelter would put you miles and miles ahead of most people going into their Junior/Senior year (and honestly of some senior guys at asset light players and banks).
Honestly all the traders I worked under seemed to have fallen into it, the path is not very linear.
Nucor (DJJ) has tons of internships that I think should open up in the next couple of months if not already
What makes metals so interesting for physical trading?
Energy obv is where the money is and lots of action happening there, ags has many trading opportunities around the world, etc.
Whereas for metals, it's mostly just long-term contracts created in board rooms with little room for true physical traders for arbs. Are people excited behind the chemistry of these metals?
even for arguments that physical metals = good seat for energy transition, I feel like oil/gas would still be a better seat because of the vol.
Have heard the exact same thing from a glencore/Traf/Vitol metals trader. The guy was not having a fun time in metals
I help trade nickel at Trafigura. Great money maker. We don’t even have any nickel! Just empty boxes that we pretend is full of nickel. Think Schrodinger’s cat but easy money
Funny and clever!
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