[SINGAPORE] Trafigura Group has hired a team of precious metals traders as it looks to venture deeper into highly profitable gold and silver markets.
Joseph Bou Sleiman, Xavier Miserez and Maxime Piccot joined Trafigura in the past couple of months from precious metals specialists MKS Pamp and OCIM, according to people familiar with the matter.
They will work under the copper team and focus on building out a desk dealing gold and silver dore, semi-processed bars that are eventually turned into commodity grade products by refineries, the people said, asking not to be named discussing non-public information.
Commodity trading giants are using vast cash piles to diversify into new markets where they can access more big clients and structure financing, as well as major supply and offtake deals.
Trafigura is under some pressure to maintain high profit levels as a wave of senior departures increases the burden of its commitment to buying back their shares in the company.
As gold prices soared to successive records and silver rallied to its highest levels in more than a decade, precious metals have become big profit drivers of commodity trading houses – such as Trafigura – that deal in semi-processed metal ores known as concentrates.
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Copper concentrates often contain smaller amounts of gold, while silver is often found with zinc and lead.
The new desk brings the world’s biggest trader of those concentrates into what is a small pool of specialist gold and silver brokers.
Although not the initial focus, Trafigura’s move could eventually see the trading house handle refined bullion bars, the people said. That is a market traditionally dominated by large global banks that operate with very low financing costs.
Unlike most other commodities, gold and silver bars are flown rather than shipped internationally, and require a much higher level of security to avoid theft. Much of what is produced by top miners is sold directly to refiners.
A growing share of the world’s gold supply also comes from smaller, so-called “artisanal-scale” producers. These sources are often shunned by larger refiners due to reputational risks, but can be attractive to traders who are willing to take on a heavier due-diligence burden.
Trafigura itself traded 21.9 million tonnes of refined nonferrous metals and raw materials last year. But it is facing growing competition as other energy-focused traders such as Vitol Group, Mercuria Energy and Gunvor Group return to the increasingly volatile markets for copper and aluminium. BLOOMBERG
