Why energy traders are returning to metals

investmentnews.com:

Some of the world’s biggest energy trading companies are returning to metals, years after getting burnt in the notoriously difficult markets.

Vitol Group, Gunvor Group and Mercuria Energy Group are among the traders building out their metals teams, as they look to deploy capital generated by record profits.

The shift comes as forecasters turn increasingly bullish on copper, aluminum and other metals, where long-anticipated production shortfalls are starting to take shape. Many commodities houses also see strong links between metals usage and power markets — another growth area for traders. 

The energy giants are entering a sector that’s proven difficult to trade in the past, and one that’s largely dominated by two players: Glencore Plc and Trafigura Group. Their arrival could challenge smaller-scale metals traders, which have struggled to turn a profit in recent years as soaring energy prices and supply chain disruptions crimped demand from manufacturers.

“For the oil traders, there’s a whole energy transition story, but they’ve also got the cash to take significant positions,” said Kristofer Tremaine, chief executive officer of Kimura Capital, a lender to the commodities sector. “A lot of metal traders should be worried – they’re going to lose a lot of market share.”

The early signs are that the new players are betting on bulk, with bigger volumes a good fit for the large-scale transportation networks of firms that move millions of barrels of oil per day.

As well as derivatives trader Woody Zhang, Gunvor recently brought in Paolo Cabrejos, formerly of Traxys, and Michael Gerard, formerly of IXM, to build out a concentrates trading business, according to people familiar with the matter. That adds to a group of traders