Traders Add Value Beyond Just Sales

Q: What opportunities do international treaties like TPP and USMCA open up for commodity traders like Mercuria?
A: Mercuria is mainly focused on the Asian market, which accounts for around 90 percent of our operations, although we have done business in the US and benefited from NAFTA at that time. Rather than international treaties, we believe the greater disruptor to the trading world is the US-China trade war that shifted demand, supply, tariffs and prices. Chinese environmental regulations have also impacted our business as the country increasingly demands clean-sourced minerals. The Chinese market previously absorbed all types of materials, regardless of how they were obtained. But the country’s industrialization process has modified its internal demand and it no longer accepts all materials, which has particularly impacted global demand for copper and zinc mainly. Our role is to guide miners in relation to the changes in Chinese regulations explaining which are the new regulations and give them solutions for their materials.
Q: What is your message for the industry regarding the added value that traders can deliver beyond buying and selling?
A: I will not speak for all traders but I can explain Mercuria’s added value. The company has a central focus on customer service and we offer financing at lower rates than those found in the banking sector. We also share our deep knowledge of the mining market with our clients, so we add value by providing counsel and often work as consultants. I think the Mexican market is becoming more aware of the real value of traders, given the number of companies entering the country and the consolidated traders already in Mexico’s mining industry.
To remain competitive against all these players, I think creativity is the key. We see market changes as opportunities to deliver better business. For example, the Mexican mining market delivers between 2-3 million tons per year. Our business is not about buying and selling these concentrates; miners must also look to the financial support provided by the trading companies they choose. Mercuria has a strong balance sheet to provide with a solid financial support. This allows us to bid for many concentrates but we solely focus on the businesses that allow to make a win-to-win philosophy.
Q: Given your expertise in metals prices, where should investors be looking to bet up to 2020 and what are the price expectations for these metals?
A: I would advise miners to invest in productive projects, regardless of the mineral but focusing on gold, silver and copper. As for the so-called lithium boom, it is based on EV batteries. International economies, however, will continue to rely on fossil fuels for years to come, so I think that the real boom for battery metals will take another year to come.
Q: Mercuria’s base metals team is based in Shanghai. What is the specific role of local offices, such as that in Mexico, in the trading process?
A: Our main business hubs are in Geneva, Beijing, Shanghai, Singapore, Calgary, Chicago and Houston. Mercuria has four offices related to mineral concentrates trading. Our headquarters are in Geneva; the South American operations are basically managed from Lima, Peru; Mexico sees Central and North America and Shanghai oversees all minerals trading into domestic market. Local offices spot opportunities in our regions based on our client’s needs. In mining, we are mostly focused on copper, lead, gold, silver and zinc.