INDUSTRY INSIGHTSCOMMODITIES SALES & TRADING

2012 MARKET OVERVIEW & 2013 FOREC ASTS

C O M M O D I T I E S S A L E S & T R A D I N G 2 0 1 2 M A R K E T R E V I E W

There is no doubt that 2012 can be considered as a year of transition for the majority of participants in the global

commodities landscape. This has been illustrated no better than by the dramatic changes in the banking space that have

threatened to reverse the exciting growth in the sector over the past few decades. These changes involved the wind down

of whole commodity businesses at some of the smaller players in the market, particularly several European banks including

Credit Agricole and BBVA. There was also a succession of senior departures at some of the industry’s dominant figures

leading to question marks about the long-term commitment of firms such as Goldman Sachs and Morgan Stanley to the

market as a whole, with rumours of both either closing down or selling off parts of the businesses.

Although such speculation has been widespread across various companies and markets, and whilst it is clear it has been a

testing period for the industry as a whole, it has almost always been the case that such speculation has been overplayed. In

the majority of cases firms have simply revaluated their businesses and restructured to ensure they retain the best talent and

refocused their resources on their core and most profitable businesses. This trend is illustrated not only in the banking space,

as several of the most established energy houses have also gone through significant changes. For example, Louis Dreyfus have

recently sold their globally renowned LDH Energy business, as well as the split earlier in the year of ConocoPhillips, with the

Houston-based oil and gas giant seemingly embracing the approach that specialist and streamlined businesses are the future

of the market rather than the simple ‘bigger is better’ philosophy employed by so many others in recent years.

Regionally the Asia-Pacific region has continued to grow as one of the leading commodities hubs globally with significant

investment into the region from both some of the biggest commodity trading houses and regional players. This investment

can be easily illustrated by the continued growth and emergence of several Asian energy houses, as well as the acquiring of

the LME by the Hong Kong Mercantile Exchange, which has led to a high demand for talented local LME candidates. Mandarin

speakers across all commodities have been frequently in demand, as well as an increasing amount of firms looking to attract

talented expats to the region.

Overall there is no doubt that market conditions across almost all

commodity sectors have been incredibly tough throughout 2012 and

have impacted upon a number of businesses both in terms of planned

expansion and being able to retain current business.

Whilst there have been many positives to 2012, withdrawals from the

business and in particular the problems faced in Europe epitomize

the struggles across the wider market. These difficulties have not only

forced some of the smaller firms to withdraw from the commodities

market, but also called into question how sustainable it is for major

financial investment houses to maintain a substantial presence in

some markets, such as the LME, which require major resources,

financing and memberships to be able to function efficiently and serve

clients that provide them with the revenue to justify making it a core

business. With European firms such as Natixis and Credit Agricole

shutting their businesses, the sale of the LME to a major Asian entity

was almost inevitable and typical of the shift in power that seems to

be occurring.

To what extent this shift and the general changes to the market

continue over the next few years will depend on many factors.

Market conditions themselves will obviously be key, as well the

approach of many of the major market players to commodities in

the next 18 months. Similarly the success of the new entrants within

energy, metals, soft and agricultural commodities who have tried to

capitalize on market instability will go some way to determining the

outlook for many commodities houses come the end of next year.

The commodities market remains an exciting and potentially lucrative

area, and no doubt firms possessing genuine physical and asset backed

business (whether that be from refineries, warehousing, or milling

capabilities) will continue to prosper and grow. How other firms in

the space are able to compete with these businesses will be a pivotal

question. From a recruitment perspective, although some of these

changes may seem daunting, whilst both specific regions and firms still

need to increase coverage in the global commodities markets, the

need for the best and talented commercial staff still remains.

C O M M O D I T I E S S A L E S & T R A D I N G 2 0 1 3 M A R K E T F O R E C A S T

E N E R G Y S A L E S & T R A D I N G

As with the wider commodities market, 2012 has proven to be a

year of considerable change for the global energy markets. Whilst

there have been major organisational and structural changes to

companies such as LDH Energy and ConocoPhillips, there have

still been numerous companies that have continued to build

their footprint in the space, with some exciting hires. Mercuria is

arguably the best example here with the hire of Roger Jones and

several members of the Barclays oil team earlier this year paving

the way for a number of other intriguing hires, most recently a

group of light ends traders from Morgan Stanley. Generally this

trend has continued with the trading houses looking to capitalize

on the best talent keen to leave the banking space.

Similar optimism can also be seen in the power and gas markets,

where although both have been through difficult periods, there

are now indications of new activity and opportunities across the

markets, particularly in Europe. Evidence of this can be seen in

firms like Freepoint continuing the expansion of their European

operation, specifically in developing their presence in both UK

power and gas with significant hires from firms such as Total

and EON. Similarly growing energy powers, such as Gazprom,

are looking to complement their dominant gas businesses with

a transferable presence in the UK and wider European power

region.

Regionally there has been continued growth across the Asia-

Pacific region, with both regional and global firms committing

increasing resources into sustaining their presence in the market.

Among the most active of the regional players has been Brightoil

Petroleum, who made a number of significant hires early in the

year and throughout 2012 to establish a new crude trading

business with the aim of positioning themselves to be one of

the biggest suppliers into the lucrative domestic market, before

also having significant changes to their more established fuel and

bunker business in the latter stages of the year.

2 0 1 2 M A R K E T R E V I E W

Europe (1,000USD)

US (1,000USD)

Asia (1,000SGD)

Desk Assistant 0-1 years’ experience 35-48 60-77 45-60

Associate 3-5 years’ experience 55-80 94-145 95-140

Vice President 4-7 years’ experience 71-125 140-200 140-255

Director 7-10 years’ experience 130-200 205-305 255-415

Despite an air of negativity surrounding the market we believe the industry is simply undergoing a dramatic period of change.

This shift in emphasis will affect many of the world’s major energy traders with firms such as Glencore, Trafigura, Vitol and

Mercuria, along with the trading arms of energy majors such as BP, Shell, having to rethink how they operate. This can be

typified no better than the on-going changes to the global oil scene, where many major energy companies expect a decline

in international crude trading for the next few years, reversing years of steady growth. Imports in traditionally vibrant markets

such as North America could well decrease throughout 2013, whilst other regions continue to grow in prominence such as

Asia and Canada (a trend which was seen across the market in 2011 and has continued this year, with Shell recently applying

for a license to export US domestic crude to Canada). Many firms are putting in considerable investments to take advantage

of these rapidly emerging markets and we expect this investment strategy to continue into 2013 for both major and minor

players in the market.

In the banking space the commitment to the energy markets over the next 12 months will no doubt continue to be affected

by on-going changes to regulation across the different regions and it is likely there will be more firms exiting the business.

It will be interesting to see in particular how banks that have restructured heavily this year will adapt to the changes. For

example BNP Paribas, who had wide spread changes to their US business this year after the shutdown of their Houston

operation in late 2011, and also lost many people at senior level in Europe and looked to consolidate by combining their

energy OTC sales and broking desks in recent months. Whether we will see a reinvestment in energy and commodities

generally by such banks in 2013 will remain to be seen and ultimately is likely to depend on market conditions as a whole

SALARY OVERVIEW

After such considerable compensation fluctuations within the energy market over the past two years, there were signs of

generally more stability to overall packages in 2012. This was arguably an indication of firms looking to align more with the

market rate after such differing strategies employed by firms during the worst of the financial crisis, to ensure they could

retain the best staff where possible.

The table below gives a broad overview of average annual base salaries for energy traders across Europe, the US and Asia

from major investment banks, trading houses and hedge funds. These benchmarks have been averaged over a sample of

candidates and take into consideration anomalies and exceptional performers. In terms of bonus payments, as with the

previous two years, payments and payment structure were most negatively influenced in the banking space and the on-going

2 0 1 3 M A R K E T F O R E C A S T

M A R I N E F U E L & B U N K E R T R A D I N G

The bunker trading markets have seen mixed results during a difficult environment for the overall shipping markets. Knock on

effects from the global slowdown in trade, together with increasing oil costs, have led to many ship owners reducing volumes,

experiencing cash flow difficulties, or defaulting on fuel payments altogether. In some regions, such as Singapore, this strain

has led to bunker suppliers and traders exiting the market, as well as an increased number of legal disputes with suppliers.

However, overall hiring in supply and trading remains strong, as trading companies look to bolster their position or diversify

into new markets. Whilst many trading houses and suppliers have looked to build a physical presence in geographical areas

which are less saturated, some are also developing portfolios in other products such as lubricants, LPG’s, and alternative fuels.

Significant hiring has been seen within some of the larger trading houses as investment is continued in an attempt to gain

larger market share. The focus of this hiring has mostly been within the back to back trading space; however, an increase has

also been seen in the demand for individuals with derivative and risk management skills, as traders and ship owners alike look

to ensure continued profitability and mitigate exposure to fluctuating oil prices.

Geographically, expansion within the Americas has been considerable as a number of European firms have established

teams within the US. Across Europe, growth has been steady with some firms hiring in the UK, ARA region and continental

Europe. The Middle East and the Indian Subcontinent have also seen development, however recently some ports, Fujairah in

particular, have felt the impact on trade restrictions with Iran.

2012 MARKET REVIEW

S A L A RY OV E RV I E W

EUROPE (1,000GBP)

ASIA (1,000SGD)

UAE (1,000AED)

Junior Trader1-3 years’ experience

32-37 36-66 64-90

Experienced Trader 3-7 years’ experience

37-70 60-120 180-276

Mager/Director Level 7-15 years’experience

80-100 120-240 240-550

Continued expansion is expected within the US, as teams established

in Houston now look to build regional teams within the West

Coast and Tri-State areas. Hiring is also expected within the marine

lubricants space, as European suppliers look to expand into new

markets.

Whilst Singapore remains one of the world’s most important

bunkering hubs, it is unclear at this stage as to the long term effects

of continued strain on the shipping markets. Any hiring is likely to be

with trading houses looking to focus on wider SEA markets, whilst

hiring within physical suppliers is expected to be minimal.

In Europe, growth within trading firms is largely expected to be

within the UK and Continental Europe. However with sovereign debt

problems and Euro Zone uncertainty in Southern regions looming,

coupled with reducing shipping volumes, hiring in these areas is

expected to be limited – particularly within smaller firms.

Whilst net hiring in 2012 has increased, there has been less demand

for entry level traders and non-revenue generating candidates. This

trend is likely to continue as shipping volumes and fuel demand suffer.

Ship owners are making careful decisions as to their bunker managers,

with many commentators suggesting that fuel costs are now the most

crucial issue facing shipping companies. Some movement is expected

as owners look to ensure that they are employing the commercial

and strategic skills now required to ensure profitability.

2 0 1 3 M A R K E T F O R E C A S T

B A S E & P R E C I O U S M E TA L S

Following a quiet year in 2011 we have seen a much more active market in 2012, with the most prominent activity coming

from the major trading houses and some banking teams going through restructuring. The major push still comes from the

large trading houses that are utilising increased capital to expand their presence in the markets.

Although the market is not back to the activity level it was in 2009/2010, there has been some significant movement within

some of the leading banks and some major players leaving the market, such as Stephen Branton-Speak at Goldman Sachs.

Some Tier 2 Banks have been seen to bolster their teams in efforts to compete with the major names; in recent weeks we

have seen the departure of precious metal trader Valerie Chan from Citi to join the Natixis platform. Changes within the

Standard Chartered team are also occurring with plans underway to shift the Asian business from Singapore to Hong Kong.

The major developments outside of this have been with the physical trading houses. One of the most aggressive hirers have

been MRI Trading, with the backing of CWT, who recently purchased the LN Metals business in order to build out their

presence across base metals to partner their expansion in the refined metals and concentrates space. In order to achieve

this rapid expansion, they have plucked major names from the likes of Trafigura, Dominic Wood, and Louis Dreyfus, Jose

Leon. Similarly other firms such as Cliveden Trading, headed by Mark Forsyth, have looked to continue with their growth and

expansion. The big players have also seen several changes, with Mercuria continuing their growth as in other commodities

across the space year, taking Liam Brown and Ben Green from Goldman Sachs to lead the metals business from London, as

well as James Jian Wu from Trafigura to head the global physical trading platform from China.

One of the major stories of the year has been the takeover of the LME by Hong Kong Mercantile Exchange in July when

shareholders approved the $2.2billion bid. This illustrates the increasing influence of the Chinese markets, with prices more

than tripling in the last decade as a result of increased demand from emerging markets, and has acted as a catalyst to the

increased activity of companies trying to capitalise on the inevitable opportunities that will be created as a result.

The American banks have also made hires in base metals, with Goldman Sachs continuing its development of the physical

team, hiring Jeff Romanek as a physical base metal trader. They, and other US banks, have sought to build physical metals

trading businesses in a bid to offset the loss of income from the forced closure of proprietary trading desks due to stricter

regulatory reforms. JP Morgan was also seen to offload their concentrates business to Freepoint, reuniting CEO David

Messer with many of his ex-Sempra colleagues and mirroring their aggressive expansion in the energy space seen last year.

2012 MARKET REVIEW

S A L A RY OV E RV I E W

We expect many of the trends witnessed this year to continue into 2013, with the growth in Asian LME business expected

to persist. Two factors that could influence the level of future growth will be the development of the LME’s own clearing

business, as supported by the Hong Kong Exchange, combined with the on-going deregulation in mainland China. This should

increase both the amount of entities allowed to trade on the LME, as well as overall volumes originating from the Chinese

market. We are also expecting to see a number of banks from emerging markets look to increase their small coverage across

base and precious, with several of the Canadian banks in particular such as CIBC, RBC and TD Securities, all making moves

in 2012 to increase their presence, notably on base metals.

Given how quiet the markets were last year, we saw little motivation from the best traders to look elsewhere, however,

with markets picking up there is increased curiosity from individuals to see what opportunities are available in the market.

This is evidenced in some of the major movements we have seen to date and we are expecting increased activity across

the metals market as a whole throughout the next 12 months. One of the major questions will be how much some of the

emerging trading houses in the space, such as MRI and Freepoint, are able to sustain their growth and now back up their

impressive hires with genuine trading volumes to start to compete with the other major players in the market. After the

general consolidation to the mining and metals industry as a whole over the past two decades, metals volume are far lower

than crude and more established commodities and so the task facing new players in the market is certainly a tough one.

2 0 1 3 M A R K E T F O R E C A S T

0

50000

100000

150000

200000

300000

Difference in Basic Salary between Metals Traders at Banks and Trading Houses

250000

Basic Salary(USD)

Bank

Trading House

Junior Trader (0-3 years) Mid Level Trader (3-8 years) SeniorTrader (8 years+)

92,800

101,100

141,216

139,100

260,800

209,700

This graph illustrates a broad salary

survey of basic compensation across

all base and precious metals trading,

including figures from the US, Asia and

Europe.The graph demonstrates that

in trading houses, basic salary com-

pensation within the upper echelons

falls lower than that of banks. We have

also noticed that bonus levels within

trading houses are likely to appreciate

with a far steeper gradient. This is be-

cause trading houses are able to apportion large percentages of book revenues to bonuses, in contrast to discretionary

bonuses at banks, which have been negatively affected by a number of variables since 2011.

C OA L , S T E E L & I RO N O R E

The general growth and expansion in bulk commodities

has continued across the industry in 2012. The Asian and

Chinese markets remain the dominant driver of growth

in the sector, although regional hubs in the continent

have had difficulties this year, with more market players

increasing competition for deals and overall market share.

The major mining firms across the market have been hit

with a slump in prices for most bulk industrial commodities,

and achieving reasonable margins has proved difficult for

most (both BHP Billiton and Rio Tinto having been seen

on multiple occasions to close loss-making mines).

The 4 year old iron ore derivative market has seen

continued growth this year, with banks, trading houses

and brokerages all looking to find the best talent in the

market. With such a small candidate pool of genuinely

talented commercial people, this has been a particularly

competitive area. Armajaro have been one of a range of

firms recently to establish a presence in the space looking

to capitalize on market opportunities in both iron ore and

the equally growing steel derivative market.

The European coal market has also seen a number

of significant moves at a senior level among both the

established and growing businesses in the region. Recent

moves include the latest in Vattenfall’s continued push into

the coal and freight space with the hire of Fred Benech

from Bunge after the group lost Alex Claude to Freepoint

earlier in the year. Other notable movements include

Matt Brock joining Peabody from Gunvor as a long-term

replacement for Alex Baileff who joined Vitol last year, and

Trafigura losing both Andy Bingham in Europe and senior

people within the Asian business.

2 0 1 2 M A R K E T R E V I E W

Arguably the main question for 2013 and indeed the following few years

across the bulk commodities sector is the degree to which current growth

rates and general market expansion can be sustained. In the banking

space we expect a number of commodities players to continue trying to

develop a presence in both the physical and derivative markets, with JP

Morgan, Standard Chartered and Standard Bank among several positioning

themselves well for a drive into the space. Geographically, whilst Asia has

been the dominant force for some time, there are indications that there

will be considerable growth across the Americas in 2013, with a number

of well-known trading houses in European and Asian bulk commodities,

specifically in coal and steel, looking to build out or establish operations in

the US and into South America.

From a candidate perspective we expect to see increased demand for

strong marketing and origination skills across the coal and iron ore markets.

Since many of the main hubs are becoming increasingly competitive many

companies are now often not just settling for candidates with market

knowledge and potential contacts they can utilise, but rather need people

with actual deal flow and business opportunities that can immediately make

an impact on the business.

2 0 1 3 M A R K E T F O R E C A S T

S A L A RY OV E RV I E W

0

100

150

200

250

350

300

50

000’sUSD

EUROPE ASIA USA

Junior Level Mid Level Senior Level

Basic Bonus

S O F T & AG R I C U LT U R A L C O M M O D I T I E S

The soft commodities market has seen a mixed year in 2012, with some of the major products struggling to reach the highs

experienced in 2011.

Cocoa and coffee have had a promising year, and we have seen companies investing heavily in the supply chain management

and sustainability measures within these products. Companies continue to strengthen CSR measures and good Agronomists

and plantation experts are increasingly sought after to help companies gain longer terms competitive advantage. Conversely

it has not been a good year for the cotton industry, mainly because consumption remains below production, leaving large

market surpluses and a lack of opportunity to cash in on demand outstripping supply.

There has been a substantial amount of activity in the global sugar markets, both in established players, but particularly from

a number of new firms looking to establish their presence in the space. Most significant has been the hire of Jonathan Drake

from Cargill as COO and head of the global sugar business at Tong Teik. Here he has already been joined by several of his

ex-Cargill employees, both in commercial and support functions across their European base in the Netherlands and Asia.

Another senior figure in the market developing a new business is Terry Sparling, who has joined Export Trading Group from

Standard Bank to build their international footprint and to complement their existing offerings across the agricultural markets.

Most hiring in soft and agricultural commodities has been from large trading houses and agribusinesses. Similar to the past

year, banks have been consolidating their impressive growth in the sector. We have also seen increasing activity in the Hedge

Fund space, with several new funds established by veterans in the industry wanting to offer customers a different complex

product – a skill developed from the experience and contacts they have established over their trading careers. Similarly,

several of the major traditionally physical trading houses look to develop this part of the business, with Louis Dreyfus, Olam

and ECOM among those keen to increase their derivative coverage.

2012 MARKET REVIEW

The most established agricultural commodities have

seen a vibrant 2012, with some of the most renowned

commodities houses looking to continue their expansion

into the core markets. Mercuria complemented their

existing biodiesel business with the hire of a team of

Morgan Stanley traders lead by Andy Perkins in Singapore.

There was also particular attention this year on the US

and Canadian grain markets, with ongoing speculation

surrounding the takeover of two of the major players in

the market: Viterra and Gavilon. Glencore finally confirmed

a $6.1 billion acquisition of Canadian based Viterra, whilst

Marubeni eventually sealed a deal for Gavilon, the US

grain trader, which has been delayed in recent months

pending approvals from Chinese regulators. Gavilon

also has an established presence in energies and the US

fertilizer market – another sector that has seen significant

growth this year.

The fertilizer market has been growing progressively

over the past couple of years with global consumption

estimated to have increased by 6.2% during 2010-2011.

Following this increase fertilizer production has boomed

across the emerging markets of LATAM and South East

Asia, with the manufacturing centres of Brazil, Russia and

China growing to be the biggest markets. A large number

of firms have been increasing their coverage in 2012, with

Keytrade, Dreymoor and Helm among the most active

across a number of regions.

AG R I C U LT U R A L C O M M O D I T I E S

S A L A RY OV E RV I E W

Europe(1,000£)

US (1,000USD)

Asia (1,000SGD)

Junior Trader1-3 years’ experience

45-77 45-95 60-90

Intermediate Trader3-6 years’ experience

70-120 95-135 90-135

Senior Trader7-11 years’ experience

130-195 140-245 140-190

Head of Desk11+ years’ experience

200-310 250-400 200-300

We have seen large variations across the

salaries for soft and agricultural commodities,

the key compensation indicators comprised

from; experience level, managerial ability, PNL

accountability, geographic experience etc.

Whilst on the whole firms have been expanding

their headcount and continue to develop ways

to attract high quality staff, there has also been a

key focus on retention levels by ensuring relative

attractive retention incentives are in place. These

often include company stock options, clear

career progression plans, regular salary reviews,

international rotation experience, good medical

schemes, and good overall general benefits.

In an industry governed by revenue generation,

profits and bonuses – traders continue to place the

higher earning value on the bonus incentives. With

the increasing government/trading restrictions

coming into play we have seen a general decrease in

the level of bonuses paid out this year. Nevertheless

those with the proven ability to grow businesses

and generate revenue are still able to secure large

bonuses.

In 2013 we expect the increasing activity across the global soft and agricultural commodities to continue and it is clearly an

exciting time for the industry as a whole. Many of the established trading houses will be keen to see the continued growth

of some of the markets newer trading ventures. Tong Teik for example is looking to complement their new sugar business

with further hires and to expand in other products and regions, with planned growth to their coffee business in both Europe

and the Americas.

No doubt a number of the large multi-product soft commodity and agricultural houses will look to develop and capitalize on

growth in expanding products such as fertilizers. Firms such as Louis Dreyfus, ADM and CHS are all known to be planning

further hires in 2013 to compete with the already established and specialised fertilizer houses. How well they are able to

compete and transfer their success into these new markets is yet to be seen but the initial signs are certainly promising with

the recent acquisition by Yara of Bunge’s Brazilian business.

There should also be continued investment into a number of other products to correspond with general market conditions.

Specifically, we expect there to be a big pressure on large agricultural houses to develop and contribute to renewable energy

markets such as biomass and biofuels, whilst we have also seen significant potential hiring across the global dairy markets in

the last few months of the year.

2 0 1 3 M A R K E T F O R E C A S T

F R E I G H T, S H I P P I N G & L O G I S T I C S

Due to the downturn within the dry freight market, the majority of

firms within the dry cargo sector have reacted in one of two ways.

Some firms have dramatically decreased their staff numbers, whilst

others have done the opposite and actually increased headcount.

The reasoning behind this being that when the dry cargo markets

do indeed improve again they will have the most capable teams

to take full advantage of these market improvements. There are

of course other companies which have neither “hired nor fired”

members of staff and are quite simply “waiting out” these hard

times in the hope that things will improve in 2013.

There have been some interesting movements within the key

freight players and significant movements at firms such as Norden,

J.Lauritzen and BHP Billiton, who recently let go a number of their

Asian team.

As mentioned last year, we noticed a high number of individuals

within the freight broking industry looking to leave their current

employment and this number is still on the increase with individuals

mainly wishing to move away from the broking sector entirely, into

more trading and chartering focused positions.

One of the most talked about areas of the freight sector currently

is the expansion of many firms into and within steel and iron ore.

Many large brokerages whose main focus always lay within the

freight sector have expanded into the broking of steel and iron

ore, mainly within the derivatives swaps markets. This has been

due to the need to find alternative markets to generate revenue

from. Some firms have even expanded significantly, such as FIS

(Freight Investor Services) who have opened a new subsidiary

Commodity and Freight Services, expanding into steel and iron

ore but also fertilizers and fuel oil.

2 0 1 2 M A R K E T R E V I E W

S A L A RY OV E RV I E W

As expected in the aftermath of 2011, the

freight derivatives markets have again been

through a testing period and it is likely

more desks could lose people here in 2013.

Many candidates currently working in the

space are keen to move into the physical

space or pure commodities focused setting.

Conversely we have seen some signs

that the market could be recovering, for

example recently ICAP made moves to

develop a 7-person strong FFA derivative

desk in London. It is likely that the growth of

many freight firms, mainly brokerages, into

new commodities products will continue in

2013.

2 0 1 3 M A R K E T F O R E C A S T

Salaries within the freight space range widely depending upon location, seniority and the company they work for. Salaries

for freight professionals have mainly been stagnant this year with no change to individual’s base salaries in most cases, apart

from the standard yearly salary reviews where a very slight increase is usually given.

Bonuses in shipping and freight have continued to fall over the last 4 years and 2012 has been no exception. Trading houses

remain one of the highest bonus payers, with many continuing to award a percentage of the book to leading traders. In

general though, as with many areas in Commodities, some traders with substantial compensation packages prove to be the

anomalies that make it difficult to ascertain average bonuses for candidates.

C O M M O D I T I E S B RO K I N G

With the challenging conditions across the commodities market throughout 2012 the broking space has seen changes like

any other area this year with several firms exiting the space whilst others have still managed to achieve impressive growth

and profitability.

Arguably one of the main stories at the start of the year was the integration process of the MF Global metals team at INTL

FC Stone lead by Fred Demler. The transition appears to have gone well in the initial period, even to the point where they

were in the position to make further hires towards the end of the year and particularly in the Asian region – although that

was linked to having lost some people in the region unhappy with how the new platform was progressing. Asia generally, like

in many other commodity sectors, was a particular hotspot in the broking space, with many firms increasing their presence

across a number of markets, and in particular Chinese LME and iron ore markets.

The growth in iron ore a typical trend this year that saw many of the leading brokerage houses looking to diversify into niche

and expanding markets. Biodiesel, LNG and other more refined products were also areas were many firms increased their

presence. There was also aggressive hiring from some smaller players in the market looking to establish themselves in the

commodity space with Cornerstone Commodities in the US, Commodity Enterprise Services, Market Securities, Vantage

Capital and Sunrise Brokers among a number of names looking to increase their standing in the market.

INTL FC Stone were not the only firm to expand aggressively throughout 2012. Firms such as Marex Spectron continued

their impressive growth post their 2011 merger, and Jefferies Bache continued their ambitious expansion in a number of

markets, most notably taking a number of senior people from the Newedge metals business. Newedge was not the only firm

to suffer a setback in metals this year, with Natixis shutting down their brokerage operation in the space altogether.

2012 MARKET REVIEW

S A L A RY OV E RV I E W

The level of activity throughout 2012 into niche and upcoming markets will no

doubt continue into 2013. From a recruitment perspective the high level of

competition for candidates covering the most in demand products will continue

to be extremely high. This year many brokerages have made hires based on

general skills rather than specific market experience. For example Mandarin

speaking brokers working in other commodities have been approached to

move into metals to increase coverage in the Chinese LME business, whilst

swaps specialist brokers were hired by firms develop the highly competitive

but potentially lucrative iron market.

No doubt another major factor that will influence growth, particularly for some

of the new entrants to the market, will be the on-going regulation changes.

This will be particularly true in the US with the Dodd-Frank reform and similar

restrictions coming into play. Although in 2012 many of the smaller players

were doing everything they could to ensure they continue to maximise their

current business and work within the new regulatory frameworks, arguably

the long-term impact of such changes will be increasingly seen over the next

12-18 months.

We expect the overall landscape within the broking space to be similar to

2012 in 2013, with many of the leading players in the industry continuing to

consolidate their presence and grow into new markets. PVM could be one

example, who although recently let a number of people go across their core

business, will be looking to complement their strong OTC oil standing with

similar coverage in other core commodity markets. It will be interesting to see

who out of the most aggressive hirers in 2012 will maintain growth and the

level of success they will have from their recent expansion.

2 0 1 3 M A R K E T F O R E C A S T

Salaries in the broking space have continued in a similar trend to previous

years with an increasing number of firms looking to pay candidates either

on a draw basis or with lower basic salaries and high pay-out percentages. In

an increasingly candidate saturated market, and particular core commodity

markets that are themselves over-brokered this has been a necessity for many

firms to ensure it is the people with genuine business and relationships that are

best compensated and rewarded.

www.selbyjennings.com

commodities@selbyjennings.com

Twitter : @SJ_Commodities

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