I'm a Physical Trader in the Asia region and look after a combined book of +1Mt for origination and sales of dry-bulk commodities. My background has been in some way or form of international trade, with 6+ years in operations before getting into a trading gig. I trade majority of dry bulk raw materials related to construction, power, steel (except coking coal and iron ore) industries to waste products which range from container cargoes upto capesizes. Even tried to dabble a little bit in alumina for a short I had once but proved to be difficult due to tight supply and restrictive channels. The beauty about the space I deal in is I see products which trade on indices that give market players a form of price discovery, and products which people have never heard of outside your typical oil/metals/ag markets. A market where price liquidity is out the window, therefore being on the ground and engaging with counterparties in person is a huge part of the job. Relationships are key in getting deals done in this space, and personal brand is important. Ask me anything - I'll do my best to answer within my knowledge. I would prefer not to discuss any salary/bonus questions as it has been covered many times before in other posts.
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I don't want to be too specific, but I can say it's a European trading house with a large portfolio of commodities, with multiple offices located on every continent. There are only a few large western trading houses that really compete against us in this space and some of the Japanese trading houses are expanding aggressively.
Yes, trading some spot cargoes into alumina refineries and clinker/cement kilns. Bauxite is an easier space to break into versus alumina.
It is a mixture of limited counterparties for certain products, and specific trading strategies. For instance for bigger volume products like thermal coal we would set a % of our book on long with the balance for spot throughout the year. We'd sell x amount to our selected counterparties on term basis and use our remaining on book for spot deals, and if market presents an opportunity for spot purchases we'd buy on book, and if there's opportunity for a phys swap then we look to free out a committed cargo for another market to make more profits. Some commodities have seasonal or cyclical cycles which give us a different strategy for trading, so I try to look at the trade book on either term / spot basis and progress from there. An example, slag byproducts, I've seen deals between a buyer/seller locked in for 1 up to 4 years in the market.
3) Coal from Kalimantan is a murky business. The guy that races Rally cars here in Malaysia is the team lead for selling the stuff that loads from the barge at Taboneo. Australia is doing a lot of M&A with their mines. Reading the CSC annual report incidated a +30% price hike in Coking coal. They are doing 11MMT a year and asked around for another 2MMT. When I called around SE Asia, everyone not only knew of CSC's order but even after lowering the specs a few times they couldn't get additional supply. Hmmm...
How do you deal with the Legal issues and Damages when Supplier doesn't play ball or loads off-spec cargo to the Buyer?
Reason I mentioned coal is because someone I know that used to work at the Morgan Stanley desk in Singapore warned me to not deal with those Haji's from Kalimantan and that Coal is not as fungible as other Commodities and therefore very tricky to deal with. The specs of the Coal I've seen from that part of the world is somewhere like 30-40% Water by weight. The Thermal or Coking Coal from that same part of the world has specs way out of what the Steel mills want. Not sure who their actual customers to be honest but they are making a fortune.
A family member was dating a member of the party in China (dont ask) and I essentially can to to grad school for free as an intl student. One of the grad degrees is international logistics.
Is that a good way to get into a big commodity trading shop?
Most common grad degrees I've come across is Economics & Commerce, International Business, Logistics, Engineering (more common in Europe), and Accounting. There are also quite a few with diplomas in Maritime Shipping as well and not holding any degrees in Asia. It can be hard without a degree in this day and age as majority of job postings require some from a top 10-30% college/university to be shortlisted.
There isn't a clear defined path into commodity trading, the best way to get a foot in the door is to network with traders/employers. International logistics is good if you can make use of it to secure an internship just like any other degree. Most if not all shops would hire a newstarter into a operational / finance type of role. People who are hired as jnr traders from what I've seen aren't necessarily trading, still doing operations for a trader/snr trader and managing a small account if they view that they can handle the added responsibility.
But it does take time, and there is so many things to learn on the job where a degree teaches you a fraction of what you really do on the job. The important takeaway is don't make a job title dictate what you do on a daily basis. We see people who do more than what their job entitles and usually they are the ones that traders want under their wing.
Attitude is something a college degree can never teach you.
In hindsight, if I had the opportunity to live overseas in a foreign country while studying I would do it without hesitation. It would be a great conversational starter in any social setting/job interview, and a bonus to learn a different culture.
I have a Jnr Trader on my desk, before he was a promoted to the title he was a trainee. As a trainee you normally do trade entries for purchase/sales contracts, and coordinate post fixture activities. Limited interaction with clients and mainly sitting on a desk 9-6.
He asked for my advice when we had his probation review. Because he had done 6 months he believed that within 1 year in the trainee (under contract) role he would be naturally promoted as a Jnr Trader on a full time basis. So I asked him what he thinks the difference is between his job responsibility to a Jnr Trader.
He said a Jnr Trader would be able to get deals, find customers, discover new markets for export products - ultimately they are able to engage more with in commercial/marketing. I asked him why does it matter if his called a Jnr Trader or just a trainee, why can't he do that now? As long as he can get the work he is responsible for done, then the world is his oyster. This is the attitude that I look for - someone who has drive and initiative that can go beyond what he does on a daily basis. Because for me I have my normal trading activities and management duties plus additional business development/origination opportunities continually - there is never enough time in the day. If you become that person who only does what is required of them day-in day-out that is fine, but it isn't what I would look for in a trader.
The best piece of advice I've ever received from a mentor: 'you should always start performing as if you are doing the next job above you'. And 'if you always ask for a job, you will only get advice; but if you ask for advice, you might get a job'.
I like to use a lot of analogies when I'm explaining things so best to describe it would be like any relationship, whether its personal or professional. Best way to build a relationship with a girlfriend, family member, colleague is engagement. Being engaged in person and having regular communication is important when you get to know someone, and longer when it's building trust and rapport.
It's quite common for traders to be travelling (international or domestic) visiting suppliers/customers either for coffee, lunch, dinner or just a catch up on a personal level. A successful trader is one that understands the constraints and advantages of a supplier/customer's supply chain, product quality, and working style - and the best way of understanding is being on the ground and engaging in their business.
For example, if you had a customer that's dependent on 50% imported material and balance of their own production, if you learn there is a potential production shortfall (from someone working at the mill, or market intel elsewhere) in 2 months you can capitalize by locking in a cargo in advance for a short you anticipate. Assuming quality is important to this buyer, and they only use 2 miners/producers in the region, and if 1 miner/producer will be short in supply for the next month and the other has no spot volume, then you would lock in the available tons for this scenario. Assuming transit time between country X to country Y takes roughly 30 days, and buyer in 2 months loses about 50,000 tons of production from their mill, and you're the only one to have the only available material (1 month prior) that meets requirements, then you are sitting in a very good spot.
This is only achievable if you have good market information, and only obtained by being on the ground and having those close relationships.
YMMV with different shops but I'm always interested to hear how other traders answer this question. Simply put, I work and live my life around it.
I travel anywhere between 4-6 months in the year, and travel plenty on weekends and public holidays because its required to fix a deal or fix major problems. Yes I do have a family, and I have to put in a lot of extra work/effort to make them feel I'm not a stranger in their life. So when I'm home and not travelling I try to be around as much as possible.
Being a trader means you are on call 24/7, even if I'm at home I am still working and taking phone calls, speaking with one of our sourcing guys half way across the world because it's his 5am and my 10pm. The hardest part of the job is it tends to make you into a workaholic, and if you love what you do and have a family then you need to find that balance to fit your life in between your work.
That's an interesting question. Price manipulation is usually leaned towards the derivatives market in physical trading but the possibility would always exist for opaque products, such as agreed price fixing. There are quite a few known cases in the past during the 90s and 2000s where large producers agreed in cohesion.
Yes.
I don't want to be too specific sorry - it's a small market.
Be able to perform your tasks autonomously and support your trader/desk well. It means to do things without being told to do, and fix issues before they arise or act quickly when they do. If you can do this and present yourself as someone who isn't afraid of a challenge and can take on more responsibilities then your trader and others will notice. If a trader takes you out to a meeting just make sure you be his/her right hand and take note of whats important to remember. It's always good to have a second pair of eyes/ears to verify what he/she heard is correct, and you might start seeing yourself being asked to accompany them more often. Other than this, enjoy your time in operations because all the knowledge you learn here set your foundation going forward. Understand your trade flows and logistics barriers as they will give you specific set of skills when you need to assess if a deal is a loss making or a golden goose.