Trafigura chief plays down energy giants piling into metals

Speaking at the start of LME Week in London, Richard Holtum, chief executive of the commodities trading giant, said on Monday the global base metals market has always been and will continue to be competitive.

Holtum told the conference: “A lot of these energy companies getting into metals, this is their second or third time but I don’t feel there’s more competition than there has been in the past. It has always been a very competitive market and that’s a good thing because, in a very competitive market, you have to make sure you offer tip-top service to your customers.”

Vitol, Gunvor and Mercuria Energy are among the energy trading firms that have moved into metals over the past 18 months, according to media reports.

Discussing the influx of energy firms, the London Metal Exchange (LME) chief executive Matthew Chamberlain said it is important market operators like LME are “not unduly influenced by any particular large positions”, adding: “Overall, in terms of the liquidity everyone is trading, investing or hedging to, I would absolutely agree it’s a positive sign.”

Holtum added: “That liquidity point is important because a lot of these energy companies, energy traders have a far more speculative outlook than us. We are called a trading company but I always feel we are a heavy logistics company – we’ve got $10bn of fixed assets providing logistic support to our trading businesses.

The Trafi chief added: “Because they are often more speculative, hedge fund/ bank-type background, the amount of additional liquidity they bring to the market is extremely important.”

Speaking earlier at the LME conference, the head of Hong Kong Exchanges and Clearing (HKEX) has said the addition of Hong Kong as a physical delivery point for the LME ties in with the group’s strategic plans for the region.

Chan pointed in her speech to the growth in LME volumes, which rose 6% year-on-year in September.