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New era in global energy and commodity trading
Deloitte has analysed the current issues in global energy and commodities trading
The traders’ role in energy and commodities trading is changing rapidly, while physical trading has entered a new era of sophistication and scale. Deloitte in Switzerland, the business advisory firm, has analysed the current issues and trends of one of the most important global trading sectors.
Changing global economic conditions are giving rise to exciting new opportunities – and challenges – in energy and commodities trading. International trading houses are, whether in oil, metals or soft commodities, extending their reach and scope. The Swiss firm of Deloitte is presenting its view on current issues and challenges facing energy and commodity trading.
Changing business models for trading companies
The energy and commodities trading sector continues to rapidly transform as more and more trading houses move towards a more integrated business model. In recent years, acquisitions of assets, whether producing, logistics and storage or downstream by trading companies have continued to proliferate, giving traders exposure up and down the value chain.
“Compared with a pure trading model where a company’s capital is essentially tied up in short term positions, moving into assets provides optionality but requires a longer-term commitment of capital with associated implications for the financing strategy for the business as a whole.” explains Chris Jones, Deloitte `leader for Energy and Resources.
This need for higher capital, committed for the longer-term, combined with constrained credit for some in the current environment has led to innovation as companies explore new ways of funding both their trading and asset-based businesses.
“With the credit tap turned down, evaluating and creatively employing the different funding tools available is critical,” continues Jones.
Risk, regulation and compliance challenges
Risk management is a core competence for any trading organisation. Nonetheless, the changing financing and funding landscape is likely to bring further compliance requirements. Additionally, continued mooted and pending regulation (for example around position reporting and clearing) or expansion into emerging markets (with issues such as resource nationalism on the rise), are challenges which will need to be addressed. “Whatever form new regulation or disclosure requirements ultimately take, many market players believe they are here to stay. As with any regulation or compliance challenge, the most successful organisations will plan early to absorb the changes into ‘business as usual’”, says Jones.
The trader’s choice of location
Geneva, Zug, London, Stamford, Houston and Singapore are the most notable trading hubs today. Based on Deloitte’s assessment, underlying changes in the market – both in sources of supply and demand – may lead to the expansion of some centres or new locations appearing. The key concerning the choice of location is the ability to secure the appropriate people with the right skills. Some locations – such as Geneva with its Master of Arts in “International Trading, Commodity Finance and Shipping” – are taking active steps to develop their talent pool for the trading business.
Deloitte’s findings are based on the results of interviews with Deloitte partners from all around the world as well as discussions with leaders from the energy and commodities sector.
About Deloitte in Switzerland
Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of audit, tax, consulting and corporate finance. With approximately 1,100 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of approximately 200,000 employees in more than 150 countries around the world.
Zurich, 11 February 2013
Note to editors
In this press release references to Deloitte are references to Deloitte AG, a subsidiary of Deloitte LLP, which is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.com/ch/about for a detailed description of the legal structure of DTTL and its member firms. Deloitte LLP and its subsidiaries are leading business advisers, providing audit, tax, consulting and corporate finance services through more than 12,600 exceptional people across the UK and Switzerland. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte AG is recognised by the Federal Audit Oversight Authority and the Swiss Financial Market Supervisory Authority. The information contained in this press release is correct at the time of going to press.