Executives from the world’s largest trading houses and mining companies are discussing market trends at the FT Commodities Global Summit in Lausanne, Switzerland, this week.
The following are Wednesday’s highlights:
SEBASTIAN BARRACK, COMMODITIES HEAD, CITADEL
“In terms of point forecasting – we don’t just pick one price outline… We are trading fundamentally, looking at shale growth etc. Even more important, let’s go to the infrastructure – ports, pipelines are getting reversed… will the capacity get there over the timeframe expected? Tariffs? What will the contracts look like?”
He added that he expects a tug of war between OPEC bulls and bears. He said that in the global environment of rising inflation fears, commodities will prove to be a good investment for many macro funds over the next year.
CHRISTOPHE SALMON, TRAFIGURA, CFO
“There has been low oil volatility so our ability to capture arbitrage is lower. One of the mitigators to that is probably diversification. Trafigura does not only rely on oil trading, we have metals and other revenue streams.”
“How do you improve revenue? You need to have an efficient platform and build up your IT systems. The big financing centers are in expensive jurisdictions, we counter that we have to develop service centers in more cost effective jurisdictions like India, like Uruguay. That’s what we can try. It cannot be done overnight.”
“We don’t want to enter prefinancing for the sake of it. It’s just a means to get a term off take contract. It is true in today’s situation; producers are much more comfortable with their own access to funds so they have more bargaining power.”
JEFFREY DELLAPINA, VITOL, CEO
“We’re still very comfortable being very active in the bank space. We don’t need the public markets and institutional investors that come with that. We haven’t been back to the market for term debt beyond bank revolvers for 5 years. We may look for the possibility of private capital but we don’t really need it.”
“What will be more active is the portfolio companies we have. They have greater need for term capital structure and we’ll probably only ask for public markets when they go public but they are still being well serviced by the banking sector.”
“Nigeria is very important to us. We’ve had offices there for decades. We do like what’s been happening for the last few years. It was challenging for a bit on the currency side. We are looking at upstream, financing as well as downstream.”
DANIEL HINES, CASTLETON COMMODITIES, CFO
“We’ve been changing the mix of our financing over the last 5 years. We were us focused power and gas. Borrowing base facility has worked very well but as we’ve been expanding and growing the oil business we’ve had to adapt and expand the mix of financing.”
“We have looked outside the bank market for sources of liquidity. On the equity side, we’ve brought in some minority investors in our various asset portfolios. Tokyo Gas came in as a minority investor and in a recent power acquisition we brought in a 50 percent equity partner.”
MARK CUTIFANI, ANGLO AMERICAN, CEO
“Ramaphosa has put out all the right messages. He started off exceptionally well. I’m very optimistic. I’m long South Africa.”
Referring to South Africa’s mining charter draft: “We know they have to work from the existing draft document. (Ramaphosa) would like to get it done in three months; I think it will take nine months.” “We think South Africa is going in the right direction but is it competitive with the world in terms of where to put our dollar?” “I always have the energy for another five years (as CEO). It’s the board’s call. From my point of view, if you can’t see another 30 percent improvement then it’s time to go. I see a lot more than 30 percent. ”Referring to Anil Agarwal, of Vedanta Resources, which bought a stake in Anglo last year: “I don’t know (if he will stay passive). He has been very happy with strategy and keeps saying management is doing a good job. He’s actually in the money today so I think he’s pleased.” (Reuters)
