Can you see the wood for the trees?
Notes from the Other Side
Retired metal merchant, Anthony Lipmann, illuminates trading for the young entering the world of metals.
When I was young in the 1960s our schoolteacher provided each child with a plastic template of the British Isles.
Our onerous job was to trace its outline onto a piece of paper and then fill in the key geographical features. The port of Lowestoft for fish, Newcastle for coal, a long thin line for the Pennines and another one for the Mendip Hills stretching from the West. Who would have thought that 60 years later I would live there, close to where the Romans mined and smelted lead using native slaves in penal servitude; at that time, under the command of Vespasian (before he became Emperor), the greatest source of lead in the Roman Empire.
But our learning was of course imperfect. There was no Northern Ireland, Hebrides, Orkney, Shetland, Isle of Wight or Anglesey. The picture of my country was circumscribed by the limitations of plastic. This is how we learnt — imperfectly and incrementally.
A geoscientist friend of mine told me the other day that when he was young in the 1940s, there were 2.5 billion people on the planet and the world consumed about 25 mln barrels of oil a day. Today, there are 8 billion people and consumption is 100 mln barrels per day. The population has gone up by a factor of three and oil consumption by a factor of four. Meantime, while it is believed the Earth is about 4.5 billion years old, the poles have only been iced for about a third of the last 100 mln years. If a man stretches out his arms, the period representing man’s existence is represented by about 1mm of his fingernail. Each one of these facts, factoids and comparisons is food and drink for the metal merchant — a moment when you can perceive a little bit more wood amongst a lot of trees. It takes time.
I often ask older students, trainees, or school children to guess how much copper there is in a copper mine as a per-centage of copper in the ore. The answers vary from 50% to 70%. Sometimes a bright spark might suggest 20%. The FT recently quoted the average copper content at El Teniente in Chile to be 0.88% Cu. It means nothing unless you compare the figure to Zambia, say, where Mopani’s copper sulphide ore averages 1.5% Cu or to DRC where some copper oxide ores are an astonishing 20% (unlike anywhere in the world).
When you start out in metals, it’s all trees and no wood. I re-member one of my first jobs was to write London Metal Ex-change prices in Pounds Sterling on a big white board that filled an entire wall of our brokers office. I dutifully marked them up, but it was a while before they meant anything, and an even longer time before I could take a stab at a sensible view (although it rarely stopped me expressing one).
The point is that fully trained metal merchants need to be carefully crafted — you could say forged and aged — and, as an employer, unless you want to buy old hacks, freely available on the secondary market, it’s really best to train and nurture your own. It takes time but it can be a stimulating journey for all. The younger person needs to be in an open plan office, exposed to everyday trading conversations, and in an atmosphere that allows questions. So, if you are that young person reading this, you need to make sure that this is what you get.
When, for example, a country not hitherto associated with consumption of rhenium (China) suddenly develops a hunger for an element — in this case rhenium for a new catalyst application in hydro-cracking — someone needs to be able to read the runes. If, as happened in this case, the said country then imports 8.5 tonnes in one year (as it did in 2022), some-one needs to point out why this apparently piddling quantity matters. It might be less than half a container-load of copper but in rhenium terms it’s enormous. (Greater than the annual output of the third largest rhenium producer and about 10% of 2023 ‘world’ supply).
Deciphering tea leaves is an acquired skill. In 2023 China then imported 25.6 metric tons of rhenium (!) Why does this matter? Because average exports from Chile of 25-30tpy were not even exceeded in 2008 when prices reached $12,500 per kg Re. And how could Chile export nearly 60mt of Rhenium in 2023 if this is the case? (Stockpile).
The context is all, and that only comes from the enjoyment of strange comparisons and a healthy cultivation of a wide range of reference.
By Anthony Lipmann
