Commodities Supercycle Seen Intact by Mercuria Energy
The commodity supercycle is in no danger of ending even as raw materials prices head for their worst month since May, according to Mercuria Energy Trading SA.
Economic growth in China will keep driving demand for everything from oil to metals, with crude prices likely to recover later this quarter, Roger Jones, Mercuria’s global head of non-oil trading, said this week at the Financial Times Global Commodities Summit in Lausanne, Switzerland.
“It’s been such a violent move over the last few days, but I don’t think we are going to see a massive correction lower from here,” Jones said in an April 16 interview. “The commodity supercycle is in place.”
The Standard & Poor’s GSCI index of 24 raw materials dropped to a nine-month low on April 17 after the International Monetary Fund cut its world growth forecast and Chinese economic expansion fell short of estimates. The index is down 7 percent this month. Commodity traders have profited from four years of rising prices in energy, metals and agricultural products.
Mercuria’s revenue rose to $100 billion in 2012, Marco Dunand, the company’s chief executive officer and co-founder, said in January, up from $76 billion in 2011. The Geneva-based company says it’s one of world’s five biggest independent energy traders.
Brent crude slid below $100 a barrel on April 16 for the first time since July on the ICE Futures Europe exchange. Copper fell to $6,800 a metric ton yesterday, the lowest since October 2011, amid concern that economic growth will slow in China, the metal’s biggest consumer.
Mercuria is narrowing its list of potential buyers for a 10 to 20 percent stake in the company, Jones said, without naming any. Credit Suisse Group AG is advising on the sale, which has attracted interest from sovereign wealth funds, private equity firms, natural resource producers and banks.
The commodity merchant is seeking to grow in Asia after opening trading desks for metals in China and agriculture in Singapore least year. It also plans to invest in logistics.
“We are actively building out assets in coal and on oil transportation,” Jones said. “We’ve got a strong pipeline of deals,” he said, without giving details.
Mercuria plans to stay privately owned in contrast to its competitor Glencore International Plc (GLEN), which carried out a $10 billion initial public offering in May 2011.
“Certainly for us, it’s not going to happen,” Dunand told the conference. “It makes sense to remain private because you can afford to have a much longer-term view.”
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