Mercuria May Expand in Metals Warehousing and Asset Management
Mercuria Energy Trading SA said it may add metals warehouses and consider starting an asset- management business after expanding into agriculture and metals.
The Geneva-based energy trader will need warehouses for the base metals trading it started last year, according to Roger Jones, Mercuria’s global head of non-oil trading. Liam Brown and Ben Green, formerly from Goldman Sachs Group Inc., run the London operation and James Jian Wu leads the Shanghai unit. Jones joined Mercuria last year from Barclays Plc., where he was global head of commodities.
“As part of our growing physical metals presence we will need storage,” Jones said in an interview at the Financial Times Global Commodities Summit in Lausanne, Switzerland, this week. “Our strategy will be based in our own needs, not third- party queues.”
The company has no interest in buying warehouses monitored by the London Metal Exchange to make a profit from lengthy waiting times to withdraw the metal, he said. Rival traders Glencore International Plc. (GLEN) and Trafigura Beheer BV as well as banks from Goldman Sachs Group Inc. to JPMorgan Chase & Co. also own warehousing companies.
The LME, which has a network of more than 700 facilities in locations from Singapore to the U.S., raised minimum delivery rates and introduced an extra daily requirement for deliveries from warehouses to reduce waiting times this year.
“The value of the asset being for the most part in the queue has to change relatively soon,” Jones said. “Non-LME warehousing costs are much cheaper than LME rates. If you change that pricing, or you change load-out rates, valuations will drop considerably and we will not buy into such a business.”
Mercuria may also consider expanding into asset management business in the next two years, Jones said. Mercuria’s rival Trafigura runs Galena Asset Management Ltd. and Cargill Inc. owns Black River Asset Management LLC hedge fund unit.
“It is something we periodically look at,” he said. “But I don’t think the timing is there just yet as commodities are less attractive to the asset side than they were three or four years ago.”