Rotterdam as a Global Commodity Trading Hub
Strengthening Rotterdam's commodity trading ecosystem
Rotterdam is a global hub for commodity trading with a particular focus on agriculture trading, such as corn, grains, soybean and oilseeds. The city of Rotterdam, the Port Authority of Rotterdam and Deloitte have together been working hard over the last few years to strengthen the existing commodity trading ecosystem and attract more commodity trading (related) activities to Rotterdam.
Global commodity trading is entering a new era of sophistication and scale, with exciting new opportunities like vertical integration, as well as risks from for example increasing regulation and international tax reform. This, in combination with the strategic action of the above partners, makes Rotterdam well-positioned to become an even more important commodity trading hub for agricultural commodities, as well as for metals and energy-carriers.
Rotterdam as global agricultural trading hub
A few years ago, the city of Rotterdam researched the extent and importance of the commodity trading industry for the Rotterdam region. The results showed that Rotterdam is home to many of the worlds’ largest commodity trading houses. The position of Rotterdam as a global trading hub is particularly strong for agricultural commodities. This position can be explained easily. Only second to the US, the Netherlands are the largest agricultural exporter globally with a value of €92b in 2017, according to CBS (7% up from 2016).
Rotterdam’s position has become stronger over the last few years as a result of increasing vertical integration in the commodity trading industry, because this optimised optionality. Currently, there is an increasing importance of commodities for the bio based economy such as sugar and biogenic waste. This provides a strategic opportunity for Rotterdam to further increase its position as a global trading hub.
The research also showed that commodity trading firms function as the metaphorical spiders in the ecosystem web, linking the city and the port together. They make use of the storage and logistics services in the port. They are even increasingly buying the port’s physical assets as exemplified by Gunvor purchasing the Q8 refinery. Next to that, they make use of service providers located in the city for certification, inspection, insurance and financing. With regards to the latter, it is interesting to note that several Dutch banks are amongst the most dominant commodity trading finance banks in the world. Because of these strong interfirm relationships, the commodity trading industry has a high impact on employment in the port and the city – giving reason to the city government of Rotterdam to support the further development of the industry.
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How Deloitte is supporting
The city government of Rotterdam has taken the initiative to further improve the key factors that make Rotterdam an attractive and highly robust ecosystem for commodity traders. The city government does this in collaboration with the Port of Rotterdam, the Erasmus University of Rotterdam and Deloitte. The efforts by Deloitte to strengthen the commodity trading ecosystem have been focused on three aspects:
- International branding and communication of Rotterdam as a global commodity trading hub;
- Proactive acquisition of commodity trading firms to Rotterdam;
- Creating a larger commodity trading talent pool in Rotterdam.
When asked what is unique about Rotterdam, the unanimous response by commodity traders is “optionality”. This translates to the ability to optimize trade books with sourcing, processing and logistics while managing the price movements through in- and output commodity product mixes in port. Rotterdam benefits from the world-class port infrastructure and the central position between the so-called ARA-region (Antwerp-Rotterdam and Amsterdam). As a global commodity trading hub, Rotterdam also benefits from the proximity to international airports and a high quality of life with affordable and available office space and living. Lastly, Rotterdam or the Netherlands in general benefit from the fiscal competitiveness and efficient custom procedures. Deloitte was asked to map all these benefits in detail and create a communication package for commodity traders all around the world. We pointed out to them how Dutch customs excel at facilitating their trade, why the Netherlands has such a favourable starting position to be aligned to international tax reforms, and how the main Dutch tax principles are highly beneficial to commodity trading firms.
The explicit purpose of the communication package on Rotterdam as a global commodity trading hub is to connect with the industry. Deloitte is receiving positive signals that high-profile commodity traders are considering to relocate activities to Rotterdam, one example includes a Zug-based trading house consolidating all European agriculture trade there by moving their sugar trading desk from London to Rotterdam. A variety of factors is creating a momentum to attract more commodity traders to the city of Rotterdam – most prominent being the increased focus on cost savings and international tax reforms. With our industry knowledge and fiscal expertise, we initiated C-level conversations with commodity trading firms currently located in the UK and Switzerland. Together with other involved Rotterdam stakeholders we are focused on attracting these commodity trading firms to Rotterdam successfully.
In addition to the international acquisition of new commodity traders to Rotterdam, Deloitte is also supporting existing commodity trading firms in Rotterdam with a variety of services such as tax advice, digital transformation (including cyber security), use of Blockchain technology for transactions and audit support. Therewith, Deloitte also continues to ensure that the local commodity trading industry and other players along the commodity trading value chain such as insurers in Rotterdam can continue to thrive.
Creating a larger talent pool
Crucial for the position of Rotterdam as a global commodity trading hub is the presence of talent. Many young people in the commodity trading business prefer the Netherlands to countries like Switzerland – since housing is more affordable here and they enjoy living in Rotterdam or Amsterdam much more than Geneva. Although Rotterdam already offers a highly skilled and multilingual workforce for the commodity trading industry, it is important to expand the choice of talent for commodity traders to make Rotterdam even more attractive to relocate activities to. The industry needs a new generation of business leaders with hard analytical skills as well as soft skills to use in multinational trading operations, and the ability to think ahead of every step in transactions. Therefore, Deloitte has been working together with the city of Rotterdam to develop educational programs for commodity trading at the Erasmus University of Rotterdam. With success: from this year, students in the Master Supply Chain Management can choose to focus on commodity trading. Moreover, a set of master classes is being developed for young professionals and specialists. The master classes are aimed at young professionals, particularly managers or soon-to-be managers in trading, procurement, supply chain, logistics, finance, and risk. As one of the founding partners of these master classes, Deloitte has invested a lot of time and eminence in this program. This has definitely paid off. Both students and traders are very enthusiastic about the master classes, and we actually notice how the participants inspire each other and make the commodity trading ecosystem even stronger. It is great to see how Rotterdam is reinforcing its top position in commodity trading. For us, it is an honour and a pleasure to be part of this.
More on commodity trading
Do you want to know more about commodity trading, the master classes, or how we can help you with a similar project? Please contact our expert team below.