Mercuria by Mercuria. Traders – SITCG Part VII

Mercuria by Mercuria.

MERCURIA is one of the five largest independent energy and commodity firm. The Group employs more than 1000 people and has a strong global presence, including offices in Houston, Texas, Chicago, Illinois, Greenwich, Connecticut and Calgary, Canada.

mercuria222

MERCURIA opens a market for more than 2,500 Texan landowners. In Texas, horses are a big deal. Mercuria, well-connected with the ranches, is understood to be a large promoter of the sport.

Mercuria might be one of the five largest independent energy and commodity groups in the world but Texas men don’t put up with companies who don’t deliver and who are stealing. Texans are the realest, hardest-working people committed to honest dealings. Many have tried and failed to gain their trust.

As a result, more than 1/3 of Mercuria world’s business is in the United States.

So who is exactly Mercuria ? Why they have become Texas’ premier crude marketer ?

What is Mercuria

It’s Dunand and Jaeggi. Ìt’s a business regulated to the quarter turns.

It’s J Aron with a better risk management, the precision of a Swiss watch.

Modus Operandi

They study the market carefully, often a number of years. Unless there is already someone competent on their team, they employ a top trader from firms which are already established in the location/sector, but the former are constantly supervised by one of Mercuria’s top executives. After a few trials they make their ways onto the market always organically and then speed-up the trading with one big acquisitions.

They are a small ship, less than 800 collaborators, and are credited to conservatively use their resources, always with a mind for efficiency. They closely evaluate performance, losers, underperformers are shut-down.

Universite de Genève, Phibro, J Aron

Dunand and Jaeggi first met studying economics at the University of Geneva in the late 1970s. Their friendship was galvanized a few years later working for grain trader Cargill and sharing an apartment while on a training course in Minneapolis. They left Cargill in 1987 for Goldman Sachs’s J. Aron unit in London. These experience have shaped the business and trading strategies of Dunand and Jaeggi who also worked at Phibro , Sempra energy before founding Mercuria in 04.

mercuria-geneva

“There are two schools in the commodity trade: The Marc Rich, Glencore and Trafigura school, which is obviously successful.

And then there is the investment banking school, which is more based upon a risk point of view. 

Phibro is perhaps the only company that came with the father and mother of the various schools (Marc Rich had previously worked for Phibro which belonged to the U.S investment bank Salomon Brothers).  

This is the environment in which we have learned”.

Because Mercuria  know how to measure and price risks and inefficiencies they can structure and manage solutions on a commodity for a customer.

dunand-and-jaeggi

Mr. Daniel Jaeggi (en vert) et Mr. Marco Dunand (en marron)

DNA/strategy of Mercuria: In its early days it profited by opening a trade route shipping Russian hssr to China from Gdansk, Poland.

From one good trade, they have organically built, a tiny Swiss-based operation into a successful and one of the top independent energy trading firms in the world…

Mercuria essentially envisioned the potential of what could become China at the early beginning of its energy liberalization. (the 1st tectonic shift in energy trading).

What is impressive with Mercuria is that they seem always at the right place, at the right moment, an essential quality in the world of business.

You could pitch the best trader of the world, in some markets supply demand offer just limited or no upside.

The opposite could be just true (and extremely dangerous).
Awful traders have made money in markets during long periods with extremely favorable fundamentals.

A trader with global trading businesses did it… It’s actually funny the way we know it.

They were placed in a different trade house, in the same exact market hired in the same trading position, but with completely reversed fundamentals, all the other variables being kept constant.

The point is that independently of trading (buying and selling), timing the change is important, otherwise the business has no strategy, direction.

Mercuria should be credited not only to have timed China but to have also for having timely recognized the oil trading potential of North America in 2008-2009, at the very early the beginning of the shale revolution. (2nd tectonic shift in energy trading, 2 on 2).

THE 3 TYPES OF ARBITRAGES; Geographical, Temporal and Technical.

Mercuria’s worldwide activities combine trade flows, a strategic upstream and downstream asset portfolio as well as associated structured finance propositions.

They understand the economics, the embedded optionality of the contracts, assets in commodity trading, can measure and price risk and are  absolutely second to none in the social-domain.

It is a not too small  company, not too big company without a commanding position in any region or commodity. The firm has sought out bottlenecks and imbalances in niche markets and positioned itself to make money trading derivatives using insights gained from its physical trading.

[Click  to enlarge]

mercuria

It would rather seem impossible, nay surrealistic but Mercuria really source 15-20 crude, store, blend in SAF and deliver to ASIA. All this… with very little own equity.

The great equalizer or risk inherent to this business strategy is the availability of financing for a constant need of liquidity.

Liquidity is akin to a privilege and its allocation is based upon performance.

In order to preserve its liquidity, the trader must perform at anytime, in any transaction, anywhere in the world.

To achieve performance Mercuria is notably supported by teams of Trading, Shipping, Law, Trade Compliance, Trade Documentation, Insurance, Accounting, Corporate finance, Credit, Counterparty Risk and Risk Management.

Contact Simon Jacques, Private and Confidential

Navigating the commodities markets with Freight and Spreads  © 2016

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3 thoughts on “Mercuria by Mercuria. Traders – SITCG Part VII

  1. Pingback: Traders-Secrets in the Commodity Game Part VIII Making A Market For An Atlantic Crude Grade in Asia/India. | Navigating the Commodity Markets with Freight and Spreads

  2. Pingback: Cargill, l’université genevoise du trading | Navigating the Commodity Markets with Freight and Spreads

  3. Pingback: Traders or Commodity Finance Banks Part VIII-The pivotal role of the commodity traders as financiers | Navigating the Commodity Markets with Freight and Spreads

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