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12 May 2021

Change Happens


I’ve just spent the last few days reading the book (The World for Sale, by Jack Farchy and Javier Blas) that Anthony Lipmann reviewed here a couple of weeks ago. It’s a good read, well-written - racily, even, in parts - as befits something produced by professional journalists. As one who occasionally writes fiction, I am in awe of the labour involved in the research that goes into serious factual writing; let’s be honest, in fiction, if you’re not sure of something, you can just make it up. The way that everything in this book is backed up by interview, quotation or other confirmation is impressive, and a testament to the respect in which the authors are held. Also, despite these days both being Bloomberg men, they were formed by the FT, which is presumably why they produced the entire work without once foisting on readers Bloomberg’s favourite trope - “the red metal”, every time copper is mentioned. Thanks for that, chaps, it’s appreciated.

It’s interesting to look at the timeline, the way the positioning of commodity houses has changed over the years. Within Phibro and, I think, Marc Rich/Clarendon, there was a strong understanding that their role was to source things in often difficult places and deliver them to the factory gates of their customers. Yes, of course there was a very clear profit motive, but there was nevertheless an implicit understanding that the function of the trader was to get the goods to the customer. The fault line between that ethos and the later approach that being a ‘physical trader’ meant buying stuff, putting it in a warehouse and gaming the system to make it as difficult as possible to move it from that warehouse - whether the customers needed it or not  - is a significant one. It’s almost as if the behaviour became more egregious as the numbers got bigger…….. I can recall in the first part of my career that their customers as a general rule spoke well of Phibro and Marc Rich/Clarendon. Later, I fear that bond of trust was severely tested, which I suppose is the thrust of the book. Anyway, I recommend it as essential reading for anyone involved in the commodity business, even if we may sometimes feel we have a different slant on some of the specifics (for me, by the way, that’s in the Jamaica/Clarendon story, where I feel there were perhaps other issues involved - but I’m not going in to that here, except to point out that the threat of Cubanisation at the time was very real, and Edward Seaga’a government had to make difficult and rapid decisions). 


On a different topic, the LME has announced that it will comment on the submissions made to it over its structural change document sometime after the 8th June. It seems to have elicited a lot of responses, and whatever is decided - particularly about the Ring - will leave a fair slug of dissatisfaction; but change happens. To draw a possibly tortured analogy, look at the paragraph above, and think of it like this. Just as the physical trading business moved from the Jesselson-inspired, customer-driven Phibro style to the amoral, profit only counts approach of some successors, perhaps a similar change has happened to the LME, as the almost collegiate broker world of the past has been eroding. For the avoidance of doubt, I’m not saying I would like to see the Ring close - I wouldn’t - but frankly, if it doesn’t happen his time, it will the next. The combination of demutualisation, and thus dividing the unity of interest of market and members, and the massive changes in technical possibilities makes it almost certain, in my opinion. But of course, I am quite often wrong……….






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