Tuesday, March 31, 2020

Top Trading Houses Weigh in at Commodities Conference

Posted by March 28, 2017

Top executives from the world's largest commodity trading houses discuss trends in trading at the FT Commodities Global Summit in Lausanne, Switzerland, this week.


The following are highlights:



"Trade policies coupled with foreign aid and sound development policy is critical. Today's global proliferation of a me-first trade posture threatens to destabilise decades of progress in negotiating."


"We all have to make the case for free trade," he said, arguing that "we have to help political leaders speak to their base".


MacLennan has yet to be invited to meet U.S. President Donald Trump but would engage in debate with the U.S. administration over trade and immigration. "I don't want to sit in the bunker for 4 years," he said.


Cargill sees the United States as a clear beneficiary of global trade, and in agriculture one-third of farmland is planted for exports, while the NAFTA agreements has helped Canada become the No. 1 market for U.S. agricultural exports and Mexico the No. 3. "Countries can source their agricultural products elsewhere if they're not getting them from the United States," he said.


Training would be important to adapt to the uneven benefits of trade, while "inclusive and responsible" immigration policy would also be vital, he said. Cargill has 1,000 unfilled positions at meat plants in the United States.



"This year we're expecting around 1.4 million barrels per day of product demand growth - that's very similar to last year, in line with GDP growth which is pretty positive everywhere. Overall that's a very good story and that's going to allow, will allow markets to begin (the) stocks draw that everyone is forecasting."


"Border tax is complicated. It's tricky to assess impact on oil price. If it were to be implemented, it would create a lot of arbitrage on imports in the first period of time and a price increase in the U.S. I don't think it's a great idea as U.S. consumers will have to foot the bill."


"There's a feeling that stocks aren't really drawing as they were expected, so (there's a) need to extend (production cuts) a bit further to eat into 300 million barrel cushion ... At $50 per barrel there's a lot of incentive to continue policy, at $60 per barrel, no. It'll depend on how fundamentals exert themselves in the second quarter."


Brent oil futures were at $51.17 a barrel at 1035 GMT.



"I think a lot of eyes are looking at Russia at the moment ... Russian compliance hasn't been 100 percent. I think a lot of the onus is on Russia to show that they are serious about this. If Russia comes to follow non-OPEC then we'll see a floor of $60 per barrel."


"Clearly, we saw a reaction to higher prices following the last OPEC meeting and a pickup in (U.S shale) production no doubt. But at the same time, because the cycle for shale is very short, what it does is it prevents companies to invest a large amount of money into bigger projects that have a longer cycle."


"While the shale producer responds very quickly to higher price, most of them are hedged therefore they have pushed the back end of the curve down. In the same way, this is going to prevent bigger projects coming around the world and I think we are going to have a supply shock probably in next two to four years."



"Our company has concluded transactions with Iran, it's very complicated ... Very strict regulations on what you can do - has to be absolutely without any touching of U.S. dollar."


Tornqvist added it was easier to sell to Iran, which Gunvor does in euros, but harder to buy. He does not see any improvement in the short term.


"There is an under-estimation of how much electric cars can penetrate mainstream driving. Not everywhere, but in places like Europe where you use cars for short driving ... Like Holland. Costs are coming down."



We don't have plans to add big acquisition to that ... We'll bring in a strategic partner at some point to help us grow the asset," he said, referring to the acquisition of Anadarko's East Texas gas producing assets.


Reporting by Julia Payne and Gus Trompiz 

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