(Reuters) – Physical commodity traders who have quietly made billions brokering oil, grains and metals shipments worldwide are beginning to yield to pressure to be more open about the way they work.
Privately-held firms such as Cargill, Vitol Mercuria and Gunvor have long kept a low profile in Switzerland, a major hub for commodity trading despite being better-known for its banks and luxury goods.
But this year, to the surprise of many, several Swiss-based trading houses have issued press releases announcing their 2009 revenue and trade volume figures and have been increasingly open to engaging with the press.
Industry experts and executives said the shift towards more openness was the result of increased attention from regulators and investors in physical commodities, as well as a desire to create a better understanding of the industry.
“Our media strategy used to be ‘no comment,'” Trafigura Director Pierre Lorinet told Reuters in Geneva. “Our growing economic role around the world is too important today not to engage, not to have a public image.”
Unlike futures traders who speculate on paper, physical commodities traders typically charter vessels to deliver goods around the world, hedging against price volatility and other risks as materials move between mines, rigs, refineries and storage facilities.
Communications strategists say it is important for the brokers to explain those operations, which have traditionally taken place outside the public purview, to reduce reputational risks from any accident involving their goods.
Patrick Prendergast, spokesman for the oil and energy trader Mercuria, whose 2008 turnover was $47 billion, said his company had made a conscious decision to make itself more accessible.
“We prefer to engage with the media to be available and try to be helpful. We always wish to have the facts as clear as possible,” he said. “We feel our employees and customers value this, that we engage actively and are willing to share news and talk about what we are doing.”
GLENCORE IPO IMPACT
One public relations executive said the dissolution of Swiss banking secrecy, following U.S. pressure on UBS (UBSN.VX), also had implications for the traders who need financing and letters of credit to arrange their deliveries of raw materials.
“There has been change over the past probably two years with everyone wanting to communicate a bit more,” said the executive who represents Swiss trading companies. “It’s just a general trend amongst all industries for more transparency and openness.”
The metals giant Glencore reported 2009 turnover of $106.4 billion amid widespread speculation it would launch an initial public offering. Vitol said its 2009 revenues were $143 billion and Gunvor said its turnover last year was $50 billion.
A Glencore IPO would very likely shift the expectations of transparency on the company’s privately-held peers, compelling them to continue to release top-line figures to show they are keeping pace in the market, according to industry experts.