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What do you think is going on with silver?
don't know , don't trade silver
big fan of precious / PGMs though , they really pumping
Base metals I'm assuming? How much legs does the rally have? If you had to pick a relative winner and a relative loser in the complex for the year ahead, who would you pick?
When you say derivatives, can you take spec paper risk or are you mostly hedging the physical?
base metals yes . i think the rally has made a lot of ground post covid . personally found it spectacular .
however do think that fundamentals have taken a bit of a backseat and macro , fiscal / monetary policy in the driving seat having pushed these metals higher . what i can say now is that business has improved considerably since last year . industrial / manufacturing businesses are pumping at the moment and demand conditions have never been so good . this partly because of supply chains being drained / run lean over 2020 but what we see is that whilst countries around the world are in various lockdown restrictions , most / if not all industry is working full time . if we can see covid behind us and start opening up the broader economies and get people driving , flying , spending more , we could start to see further gains .
furthermore hard to discount fact that we are about to embark on a massive new energy transformation . this will have huge implications for demand of all metals .
do i think we heading into a supercycle now? no , i think what we going through now is a cyclical bull cycle but post near term boom and bust , you will see large demand growth across the whole base complex that could end up being a supercycle .
if i had to choose one it would be cu . cu is king and fundamentally very strong , nearby deficits to persist , mkt is in backwardation and should run a leg higher maybe even surpassing its previous ath . furthermore cu will be integral in green energy transition we embarking on for the forseeable future .
also a big fan of ni + co but they have challenging supply / demand dynamics in the near term .
loser ? probably pick zn .
on derivatives - both , book is mainly to manage physical price risk / spread risk but we can take spec positions as well .
Good stuff!
Did you start in this field right out of undergrad? What made you decide to choose this over other areas of finance?
before and during uni i wanted to work in finance . a friend of mine got me into commodities and i thought it was super fascinating . after this i did whatever i could to get into this business . i started from the ground up in ops and worked my waythrough the business . the only way to get into a front office role is to learn the business inside and out
i tell the younger kids that want to get into this business that they need to rly want it . it's so important as a trading job is not guaranteed . there isn't linear progression and you have to work rly hard , build rships with your seniors and with a bit of luck , once the opportunity presents itself , seize it
Hi!
First if all, thank you for the Q&A - this is exactly what I needed at the moment!
I have a strong resume and am pursuing a master‘s degree - but I still have no Idea what to work as after graduating.. and recently I stumbled upon commodity trading and thought it is fascinating. Here are my questions, I‘d be very grateful if you reply to either one of those (or all of them!)
1. Was your career path linear / did you plan to end up in the metals area?
2. What skills would you say are your bread and butter at work? Is it coding-heavy or is it still more on the fundamental side?
3. What would be the best options for someone interested in commodities and derivatives to get a look into the industry (besides this Q&A)?
4. Any book recommendations?
5. Is there a moral dilemma in the commodities sector? In my research I‘ve stumbled upon many documentaries about pollution by (e.g. Glencore‘s) factories in third world countries - does this affect your life in any way?
I hope my questions are not completely out of place - I‘m from the math side and have a lot to catch up to, but thats why I‘m here.
Thank you in advance!
1. no it wasn't linear but i knew exactly what i wanted and i was willing to work hard for it . night / day , wknds and just pushing myself . you need perseverance
2. you need to be good with people , have a decent level of financial understanding , and be able to analyze and dig into the mkts you trade
3 / 4. there are several unis that provide courses around this topic . i won't type out a large book list here but if u want one i can fwd you in a DM .
5. if i'm honest , not rly but its certainly a hot topic and a lot of companies in the industry and working on cleaning it up .
Hey do you mind dm’ing me the book?
Curious, how do metals guys use data/quant techniques to trade?
in terms of data we are meticulous in building supply and demand models . supply side very easy as most production is in the hands of large public companies and their data is publicly available . where information is harder to get by either on the supply or demand side we nurture / maintain strong relationships with producers and consumers . we are constantly engaging them , practically every day to understand what's happening on the ground .
for producers , we want to know any production issues at the mines , smelters , refineries ?
for consumers , what's happening with their production forecasts , order books , consumption patterns ?
there's a lot of intel gathering , which is a integral part of the job .
also macro indicators are very important to understand where business on the ground is heading , high frequency data points like PMIs , Chinese TSF , auto sales , construction / infra indicators etc . but these are backward looking . where you get a real sense of whats happening now and potentially in the future is by talking to counterparties .
on the quant side , i must admit , we utilize very little . we do have people working on these things day to day , preparing / presenting new models etc but less practical for physical trading and maybe more applicable to paper trading
we do also trade paper mkts but we tend to lean on our fundamental analysis to build thesis around same
What's the bonuses like?
can't say
How big is the physical metal market? Not sure how to quantify this, but maybe dollar value traded per month.
Location + Comp?
can't say
Hey Commtrader.
Rare earth metals. Will we see ANY downside pressure on price in the next 6 to 12 months? How F'ed up are the supply chains right now due to the "China Flu"? Do you see any particular issues with Cobalt, Silicon or Lithium supplies over the next 12-18 months? How bad will a potential rise in interest rates gum up any carry trades?
...and a half joking question. Do you believe the "Dr. Copper" is really a leading indicator for economic recovery?
Namaste
D.O.U.G.
don't trade rare earths ,
cobalt - only issue is that it gets to expensive . trading north of 50K per mt now . can bring on additional supply and / or push users to substitute .
otherwise ya to a certain degree do believe copper is a bellwether but its strength as a signal is probably diminished in this orgy of fiscal / monetary accommodation
in terms of interest rates rising and impact on carry trades it will certainly bite as spreads won't be able to compensate for same .
Thank you, sir.
Hi,
Please don’t laugh.
Does the little guy have any chance of making money trading silver futures from home using basic technical analysis ?
Thanks M
don't trade silver sorry mate
Always wondered how physical trading works. In “classic” trading you are in front of a monitor, do your stuff and trade various instruments, but I think that physical trading is a whole other story. So, in general, how does it work? Do you work for clients or for personal return? Which kind of software do you use?
Sorry for the stupid questions, but I sincerely know nothing about the industry.
big question man
from my perspective it's important to understand the full value chain , whether it mining / smelting / refining , logistics / warehousing , financing / credit , hedging / derivatives , pricing mechanisms on purchase / sale , position / exposure mgmt , basic contract / legal understanding , fundamentals / micro of the commod you trade , macro understanding , etc. etc.
in terms of pure trading , you need to understand how you can exploit value on both sides of the trade . it won't be as simple as buy at x and sell at y . you won't be able to generate sufficient PnL in metals mkts like this . you need to look at your QPs (pricing periods) , payment terms , logistics , product premium / discounts , etc .
i know above is relatively vague , if you have specific questions on certain points i can go into more details .
it's also very important to be rship driven , you need to be in constant contact with your counterparties and build rships with all of them . they will be a big source of knowledge and info and also makes it easier to conclude deals
to answer your question on clients or ourselves , we work to generate pnl for ourselves .
Loving the answers so far
What advice do you have for learning how to trade in this space?
if you really want to learn this business you have to be willing to suck up your pride and do hard yards on an ops desk pushing paperwork and executing business. this gives you the opportunity to access information / ask questions to senior traders and / or others. really i can't stress enough how important it is to get your foot in the door even if it's low level ops. we get a lot of ivy league / top uni kids who don't know their ass from their head and crack under the pressure of an ops role. it sounds easy but you're given a lot of responsibility from logistics / scheduling, credit / financial risk mgmt, ensuring pricing / hedge requests are entered correctly, contract writing, etc. etc.
removed
thanks these are good questions.
1. you will never learn it at an expert lvl unless you spend time on site. you'll have to get familiar with the various stages of beneficiation from ore to metal at very least. doesn't have to be deep but the deeper you go the better you are at holding a conversation with an engineer at the mine and / or asking the right questions when you're trying to dig for information. Also depends on the products you're trading, if you're trading intermediaries like concentrate for example it will be very important to understand smelter / feed economics. not all concentrates can be processed at every smelter / refinery etc. there are different feed composites which include recoverable metal and various impurities which you will need to take into account. you don't want to be in a situation where you've sold / delivered conc which can't be processed by the customer. also don't want to end up buying shxt which nobody will buy / can't be sold. I think you can do a lot of research online but really where you can gain most knowledge is on the job, speaking to the people on the ground. it makes the whole learning experience real and applicable. obviously not everyone has the luxury of on job learning so online resources and / or books on metallurgy should give you the basics. you can get familiar with various sites from annual reports as well.
2. when you trade physical metal, you're generally working on 1 or 2 products only. and only a form of each i.e. metal or conc. so you'll be expected to get deep familiarity with the products / forms you trade. you're right in terms of seats but generally in trading houses, you'll start off doing ops in the metals you would potentially be destined to trade. cross metal / commodity transfers are very exceptional within an organization. possible if you move shops.
3. as said previously i worked like a dog on the ops and back office derivatives desks. I literally worked day in / out and on weekends. i made sure traders could count on me to execute and ensured my work was bullet proof. trading shops are generally very flat and you have good interface with traders and it's important they can count on you / trust you to do the job you're doing. as you earn trust, you'll get more responsibility and by doing so you will also build rships.
in my case my break came after a few traders vouched for numerous times to my boss. when a seat opened i was rdy to go.
Comment removed by user.
Regarding number 1 I don't think the exit opps are terrible. Management at miners, large metal consumers can be really good jobs. You look at what c-suite execs are making at even middling producers, those are real numbers, including for companies that are probably run terribly. The kind of knowledge you have coming from trading is miles ahead of most of those guys. You should easily be able to move into a buying position at one of your big consumers once you have the experience as well.
Good book recommendations relating to the commodities market?
Read The King of Oil, looking for something along the lines of More money than god.
World for Sale which just came out.
Ballpark comp / breakdown at large trading houses few years in?
I don't see why you would be uncomfortable answering this - if so, please share why.
second this... as someone who is just starting out at a physical commods house, I still have no idea what the comp progression will be like (can't find any decent numbers on WSO) so any vague indicators would be very helpful...
How often do you spoof the market?
Good thread. Most of what you said can be applied to the whole commodity industry regardless of whether you work in oil/metals/agris. Set of skills and responsibilities are the same. Only the technical knowledge over the specific product changes.
Did you consider going into sales? From your perspective what are the pros & cons of a career in trading vs sales?
Thanks!
Hi,
You evoked the energy transition which seems to has been accelerated by Covid, I'm trying to enter in the close circle of commodities trading. Honestly I'm more interested in non-ferrous metals, but I see much more offers looking for juniors in Renewables energies (biofuels, biogas etc.) trading/ops.
To your knowledge is it financial rewarding to work in that segment given that the renewable markets are still quite illiquid?
could you make money if you were a retail futures day trader..just trading from a chart, and with a standard news feed?
maybe trading gold, silver, copper futures?
no
how do you trade that is different vs what a standard retail trader can do...and what do you have access to that makes the difference?
what's your edge?
Thanks @commtrader for doing this. I'm currently interning at a major in commercial and it's super cool, but Vitol, Trafigura, Mercuria, etc. seem interesting as well. I know it's not apples to apples, as we do not trade metals, but based on your experience, colleagues, things you've seen/heard, could you share any info on career differences, maybe pros and cons, earnings potential, work/life "balance", career network, future/exit opps, internal career mobility, etc. between a major and a trade house. This is not meant to be any kind of snub, as I actually think metals would be super cool. Speaking of, do you have any undergrads joining your company/team, and how could they start a career in metals. Thanks!
Hi @commtrader and thank you loads for doing this, it is extremely helpful!
I have one question that haunts me. Is it possible to move from shipping/chartering/wet & dry freight operations to trading with the commodity itself? Or would the shipping/freight specialists be pigeon holed?
Thank you very much!
Can you reveal comps of a typical trader in RM?
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