What will disrupt Dry Bulk Shipping?

[CRUCIAL POST EVERYONE: IT WAS WRITTEN BY AN ASSET OPERATOR WHO UNDERSTANDS THE PEOPLE AT THE OPPOSITE SIDE, WHO HE IS FACING IN THE MARKET SO THE REASONS WHY IT IS VERY DIFFICULT TO MAKE THE BREAK-EVEN. Continue reading

“The Poverty of Academic Finance Research”:Trading Brent/WTI spread

The implication is that most published empirical discoveries in Futures Trading are likely false… Continue reading

Hocus-Pocussians, Commodity Credit Stress and Economic Gambles

Hong Kong Financial place by any standards, is very corrupted and only concerned by its well-being.

The role of financial analysis research is misunderstood by firms and maybe also by young people who dream to get a foot in the financial industry.

An Analyst has to be independant and be allowed to express an opinion, even if it’s negative.

To me the Iceberg case has focused attention on the risks that financial analysts face in candidly reviewing companies accounting. Continue reading

Kurtosis and Idiosyncratic Risks of Commodity Trader Noble Group

We maintain the call made in Noble Group’s Kurtosis Awakening Moment for the Commodity Markets in which we profiled the ongoing fast-motion trainwreck of Asia’s largest commodity trader.
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Noble Group’s Kurtosis Awakening Moment for the Commodity Markets

Trust is everything in commodity trading, it is also what is maintaining a constant risk premia in this market.

Noble Group is Asia’s largest commodities trader.

According to GMT research, Noble Group took what they have estimated as between $4 to $6 billions $US worth of fair value gains on asset valuation over the last 5 years.

Just before their Q2 earnings release, I have published the reasons outlining why I believe that the trader is an accounting hocus-pocus.
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A win-win Deal, Teekay Tankers

Teekay Tankers’ purchase of 12 suezmaxes, a win-win deal By Barry Parker from New York The fate of Principal Maritime, a tanker company backed by private equity (PE) powerhouse Apollo Management, was revealed last week, with the announcement of the … Continue reading

The Trans Mountain-Panama Shipping Pipeline to Philadelphia

PBF Energy – has recently crafted an unorthodox trade: Delivering a 500,000 bbls Kearl Lake cargo (Albertan) to Philadelphia through Panama by LR2 tanker.
It is a move that you would normally expect from guys like Freepoint Commodities, (not PBF). Continue reading

The ETFs, Redemptions and Creation Arbitrages Case

According to Goldman Sachs Asset Management. ETFs have a very transparent portfolio holding and predefined creation basket. This allows arbitrageurs to create and redeem units every day through the in-kind creation / redemption mechanism. Such arbitrageurs are always in the market to take advantage of any significant premium or discount between the ETF market price and its NAV by doing arbitrage between the ETF and its underlying portfolio. Thus, the open architecture of ETFs ensures that there is no significant premium or discount to NAV. At the same time, additional demand / supply is absorbed due to the action of the arbitrageurs. Continue reading

ThisisNoble’s Farewell

[IN FEBRUARY 2015, ICEBERG RESEARCH ISSUED A REPORT ALLEGING, AMONG OTHER THINGS, THAT: (I) NOBLE GROUP EXPLOITS THE ACCOUNTING TREATMENT OF ITS ASSOCIATES TO AVOID LARGE IMPAIRMENTS AND FABRICATE PROFIT; AND (II) CONTRARY TO WHAT NOBLE GROUP’S MANAGEMENT CLAIMS, THE … Continue reading

TRADE FINANCE : Why The Idyllic Surmise is Broken

In trading, there is a time lag between the shipment of products by an exporter and their arrival by the importer depending on the duration of a voyage. Normally, exporters will require payment upon loading, whilst importers ideally would delay payment until arrival. In its simplest form, trade finance is bridging this timing lag by providing a short-term credit facility. This activity is intermediated by banks and also collateralized by the underlying cargoes as well as by additional export guarantees. Continue reading

The Mastermind Behind Clarksons: Martin Stopford

Shipping is not a boring activity, it has always attracted ultra-smart and passionate types. Martin Stopford is a Brit Economist and the Mastermind behind Clarksons Research, part of Clarksons group. He is a sophisticated and Smart type with formidable intellectuals. Continue reading

Commodity Trading Case: The Location Arbitrage

An Arbitrage is a trading strategy to profit from market inefficiencies in price differences of a given commodity, either at the same location or at different geographical locations.

Frontier Effects are an excellent starting point in a discussion about arbitrages. Continue reading

Freight Trading Lingo Demystified

Simplifying how oil traders make deals on various freight transactions terms.
inShare99

Have you ever wondered about the meaning of commodity trading terms, or Incoterms? FOB…DES…DDP. Say What?!?

Incoterms were established by the International Chamber of Commerce (ICC), a non-governmental organization, to standardize the interpretation of major trade terms.

Sales contracts using Incoterms define the obligations and risks of both the seller and the buyer. The obligations cover the period while the merchandise is in transit, whether by land, sea, air or a combination of modes. Continue reading

Risks of Non-Compliance of CL.19.7 CL.20 under BPVOY4.

The shipping trade is nested by an ancillary web of commodity sale & purchase contracts crafted by traders to create “the ultimate trading optionality”actionable unto the smallest decision timeframe possible !

Disputes arise when the liabilities and risks of such trade innovations are not carefully apportioned in the S&P contracts. Moreover some organizations exert an operational veto on the commercial operations of others because of physical/logistical constraints and in some case because of their natural bottleneck monopoly. Continue reading

Economics Fundamentals of Ethanol Blending in the United States

Recently, a solid MISPRICING has appeared in the RIN market with D5 RIN (the RIN for advanced cellulosic ethanol have become expansive vs E100 and Gasoline( shortly after the EPA issued RFS and during pending changes for Brazil tariff on foreign imports). A major U.S IB has brought Brazil Ethanol to blend ethanol to generate the RIN, then separate it and cash-out the credit attached. Continue reading

Raclette, Courvoisier and Mignardises: SWISS DERIVATIVES REVIEW- MAY 2015 ISSUE 60 *

Focus: Commodities
In the SWISS DERIVATIVES REVIEW- MAY 2015 ISSUE 60 we cover an interview with Norman Hay (ex-CEO Cargill International):; there’s a piece on oil hedging from Simon Jacques, the ‘Trade Finance Shipping Wizard’; and we review the struggling Greek economy. Continue reading

Re-Convergeance and Non-Convergeance of the LME and Off-Exchange Markets in the Aluminium Market

Two of our finance students in Derivatives Products at Université de Moncton did a work on Aluminium during last fall that you can read here. They were not only right, they timed it, which the mother of all bombs (ask a trader).* … Continue reading

Big Hands Lifting the Curve in the Capesize

The Dry market participants are not particularly upbeat about the recent rise in the Capesize.

In the physical Bocimar, the dry bulk arm of Compagnie Maritime Belge (CMB) has been “capsized by their Capesizes”, reporting a near ten-fold increase in Q1 losses.”

Jean-Paul Dezutter is drybulk shipbroker at Aegir, Botra & Partners in Belgium. As an active broker, market participant and member of The Baltic Exchange, Aegir, Botra & Partners fixes bulkers between End-users, Traders and Owners. Continue reading

Traders – Secrets in the Commodity Game Part VI

Opinions and Analysis brought to you by Commodity Merchant Trading and Shipping Advisory Services Credit: aegfi Systematic Risk in Commodity Trading [“the business of moving commodities is markedly different to trading or speculating derivatives”, “unlikely to assist in optimising energy market” whether opinions … Continue reading

Traders – Secrets in the Commodity Game Part V

AGEFI (l’agence économique et financière à Genève), AGEFI is seen as the”WSJ ” of Geneva: it is a highly regarded financial information provider. This month, AGEFI Indices has a special edition produced by members of the Swiss Trading & Shipping Association (ex GTSA), an association is very representative of the Swiss-based community of international commodity trade, finance. Real practitioners, so it’s worth a look. I’ve selected for you some of the articles that you may want have a look at. Continue reading

Banks Are Scaling-Down Commodity Trade Finance

[The only thing that Markets can’t self regulate is irrationality]. [Swiss Banks will still exist in 400 years but banks in Asia* it is less certain as they emit documentary credit paper,  l/Cs for Trading entities pushing the limits of … Continue reading

Oreos, Vomitoxin and the Price of Wheat

The story starts like this. “In late Summer 2011, cash wheat prices for #2 Soft Red Winter Wheat at Toledo, Ohio had risen from a price of $5.74 per bushel on June 30, 2011 to $7.72 per bushel on August 26, 2011.” (Kraft’s flour mill was in Toledo.) “Over the same time, the price of December 2011 CBOT wheat futures increased from $6.57½ to $7.97.” So the price of the actual wheat that Kraft wanted had gone up, and the price of the future wheat that Kraft didn’t want had gone up, but the future wheat price had gone up by less. Continue reading

The Frontier Between Capitalized Costs and Arbitrages. What has caused: the collapse of Asian/HH LNG premium, flatness in basin differentials and the collapse of LNG prices on the international market ?

LNGCs are mostly fixed on long-time period c/p during several months or years so a lot of opportunity costs in the LNG trade are capitalized. Since it is difficult to draw the straight line between profit/voyage and real costs in LNG, it’s a good example of what I meant but “what the trader has in its head (unrealized G/l) might differ from what it really costs for the company…”. Continue reading

Evaluating Portfolios in Trading: From Shipping to Agriculturals and Energy

  Price risk: Fluctuations in the price of the underlying energy (or freight, etc…) commodity. interchangeably called market risk or commodity price risk. Energy Traders are typically sellers of price risk, each day they are looking for counterparties in the … Continue reading

Niton’s Scrap Fund, Hot Pancakes Amidst Irrational Exuberance

Most of the commodity economic is about shortage: there is a shortage of “something for someone somewhere”, but now it is changing.

Economically speaking, few segments in the entire maritime spectrum still have considerable upside potential when we fully consider their downside risks. Continue reading

Crude Oil Trade Transactional and Financing Timeline

The Trader agrees to buy oil from an oil major loading in 41-45 days at a negative differential and to sell the oil cargo to a refinery for delivery in 101-105 days at a positive differential. Continue reading

What can we learn from the Rotman International Trading Competition ?

  A team of undergraduate finance students from Italy walked away with top honours during the 12th annual International Trading Competition at the University of Toronto’s Rotman School of Management. This Italian school also made the top last year. 1. … Continue reading

Agriculture: Canada is selling more Grain to the U.S.

  While Farmers and buyers a buy, sell and move grain in increments, but in the medias exports receive a disproportionate level of publicity to its actual size in the market. Strong exports are usually a double whammy: for farmers they … Continue reading

Cargill’s Transportation Innovation: Baie-Comeau Ocean Terminal.

Cargill’s Transportation Innovation: Baie-Comeau Ocean Terminal.

  Creating a new way to serve global markets by water   Perched on the St. Lawrence Seaway, the port at Baie Comeau unlocks new opportunities—now Cargill can serve markets by land and by sea.           … Continue reading

Cargill’s Transportation Innovation: the Unit Train.

Cargill’s great transporation innovation: The Unit Train Given the chance to cut rail costs by 50% and help farmers get grain to market, Cargill attempted something never done before: obtaining enough grain to fill 115 rail cars. In 1966, Illinois … Continue reading

Cargill’s Innovation: Taking a Chance with Corn Milling

Taking a chance with corn milling Driven by its spirit of innovation and exploration, Cargill goes from corn industry newcomer to preferred supplier. In May of 1967, Cargill News published a small story reading Oil Leases New Plant. The headline … Continue reading

Agriculture: Canada on the fringe of the grain export market

[I don’t entirely agree with this analysis but still worth a read…]   Canada on the fringe of the grain export market In a world where a country’s market power starts with its grain storage capacity, we’re losing ground fast … Continue reading

Ethanol Blending Economics: Higher RIN prices support blending despite lower gasoline prices.

Higher RIN prices support blending despite lower gasoline prices. With the exception of two short periods in late 2013 and the first quarter of 2014, when winter-related logistical bottlenecks drove up ethanol prices, spot ethanol prices have consistently been lower … Continue reading

Agriculture: the Acreage Switch Play and the Soybean-to-Corn Price Ratio.

A good crop always starts from the soil. Agronomists and Crop Specialists are busy with soil sampling this spring as many growers are asking to have more fields sampled because of a huge yield variance between fields in 2014. We … Continue reading

Evaluating Portfolios In Energy Trading Pt.1: The Endless Belt of Risks

In the past institutions could not sell complex risks to investors, now it’s not only the case, it’s a part of their daily business. CASE A: The German Bank and the Norwegian Shipowner: I) A German bank is an underwriter … Continue reading

Want the Juice ? Bespoke Merchant services for Grain Farmers.

Commodity  Merchant  Trading  &  Shipping  Advisory  Services,   the specialist in Price and SCM risks, provides cutting-edge Financial Planning Analysis (FP&A) advisory for Commodity and Transportation Investments, bespoke merchant services for top producers. Grain Farmers, want the Juice ? Stage … Continue reading

SAVIUS LLC, Proprietary Commodity Trading Boutique Part I.

SAVIUS LLC,  Proprietary Commodity Trading Boutique. Business Profile: Savius LLC Headquarters: Chicago, Il. Business Activity: Proprietary Trading Boutique Trading Manager: Pietro M. Terzano Studies: Business Administration at Université internationale de Monaco. Background: shipbroker at Bravo Tankers, derivatives broker at Bravo Futures (founder). … Continue reading

Kool-Aid and Golden Eggs: Simon Jacques “Egg-Crushing Contango Kill-Zone”

By Barry Parker, New York Credit: Capital Link NY Shipping Industry Notes, Kool-Aid and Golden Eggs, Monday February 2, 2015. One analyst one specializes in the interaction of ocean freight with commodity price arbitrages and spreads, Simon Jacques, author of the “Trade … Continue reading

The Economics & Physical Aspects Behind The Contango.

Commodity Merchant Trading & Shipping Advisory Services They are two approaches in commodity trading: Risk-Based (RBA) and Flow-Trading Analysis which help traders to evaluate the nature of a market before undertaking a position. Floating Storage is very much about RBA. … Continue reading

C3/C4 Hit the Bid, Marcus Hook owns the Atlantic Basin

The Natural Gas Liquids (NGLs) market, given its unique structure, never ceases to amaze us. Its elastic demand determined by the price differences between various feedstocks and its supply chain are two crucial drivers to understand value in this market. The … Continue reading

Mexican and Canadian Oil Flows as a Function of Commodity Price Benchmarking and Structured Commodity Finance

“Something’s going to have to give,” said Ed Morse, Citibank’s head of global commodities research in New York. “U.S. refineries built out their capacity to run heavy barrels,” Auers said. “Refineries in the rest of world aren’t built to run … Continue reading

Europe/U.S arbitrages: Christmas Gifts to roll into the new year ?

It’s the holiday season but the energy markets never stop.  Ultra-low Sulphur Diesel (ULSD) is trading in the U.S at a premium to values in the U.S Atlantic coast, amid weakness in the ICE high sulfur gasoil futures and below … Continue reading

Learning Spread Trading, is it worth it ?

  Lexicon:  ST=Spread trading FT=Futures Trading RM: Risk Management   In the world of the commodity futures markets, no subject generates more interest and questions than spread trading. A spread combines both a long and a short position put on at … Continue reading

Unbekannter Rohwaren-Riese Mercuria «Meine Familie ist seit 1407 in Genf»

Unbekannter Rohwaren-Riese Mercuria «Meine Familie ist seit 1407 in Genf» Interview: Gerald Hosp und Jean-Pierre Kapp 27.12.2013 Mercuria war 2004 von Marco Dunand (l.) und Daniel Jaeggi, zwei früheren Händlern von Goldman Sachs, gegründet worden. (Bild: Lionel Flusin) Mercuria ist … Continue reading

Commodity Firms Assessing a New Global Market Place in 2015, Traders – Secrets and Commodities Part IV

    Foreword by Simon Jacques Commodity trading might be defined as shifting the commodities from surplus regions to deficit regions or matching the production with a sale in a deferred time-frame – and hopefully making a profit in the process. Lately, … Continue reading

An Apple-to-Apple Basis Comparison, One Jones Act unit vs One Foreign Flag Vessel Unit. $/bbl What the Heritage Foundation got wrong about the Jones Act !

An Apple-to-Apple Basis Comparison: One Jones Act unit vs One Foreign Flag Vessel Unit. $/bbl What the Heritage Foundation got wrong about the Jones Act. The Merchant Marine Act of 1920 (P.L. 66-261), also known as the Jones Act1 (JA) requires all vessels shipping cargo … Continue reading