COMMODITIES TRADERS

CLOCKWISE FROM TOP LEFT: /BEAWIHARTA, KEVIN ZHAO, TIM WIMBORNE, DAMIR SAGOLJ, NICKY LOH, TODD KOROL, YUSUF AHMAD, ROMEO RANOCO, JO YONG-HAK The trillion dollar trade While regulators have banks in their sights, powerful commodity trading firms mostly fly under the radar. Here’s a guide to the biggest in the business

BY JOSHUA SCHNEYER biggest trading houses. in tech or telecoms. Many amass speculative NEW YORK, OCT 21 They form an exclusive group whose loosely positions worth billions in raw goods, or hoard regulated members are often based in such commodities in warehouses and super-tankers OR THE SMALL CLUB of companies tax havens as Switzerland. Together, they are during periods of tight supply. who trade the food, fuels and metals worth over a trillion dollars in annual revenue U.S. and European regulators are cracking Fthat keep the world running, the last decade and control more than half the world’s freely down on big banks and hedge funds that has been sensational. Driven by the rise of traded commodities. The top five piled up $629 speculate in raw goods, but trading firms Brazil, China, India and other fast-growing billion in revenues last year, just below the remain largely untouched. Many are unlisted economies, the global commodities boom global top five financial companies and more or family run, and because they trade has turbocharged profits at the world’s than the combined sales of leading players physical goods are largely impervious to

october 2011

(This story has been corrected. See details at the end of story) TRADING HOUSES october 2011 financial regulators. Outside the commodities business, many of these quiet giants who Invisible giants broker the world’s basic goods are little known. Their reach is expanding. Big trading firms How the top 5 commodity trading companies by revenue compare to other selected industries now own a growing number of the mines Latest annual revenue - $ billions that produce many of our commodities, the 900 ships and pipelines that carry them, and the 800 Tesco warehouses, silos and ports where they are 700 CVS Ford stored. With their connections and inside Caremark JPMorgan knowledge -- commodities markets are mostly 600 Nestle Daimler ADM 500 Koch Ind. Hon Hai free of insider-trading restrictions -- trading Carrefour General Allianz China Mob houses have become power brokers, especially Motors IBM 400 Bank of Cargill in fast-developing Asia, Latin America and Telefonica America Hitachi 300 VW Verizon Africa. They are part of the food chain, yet help Berkshire Glencore 200 Wal-Mart Hathaway HP shape it, and the personal rewards can be Nippon Toyota huge. “The payout percentage of profits at the 100 Vitol Axa Samsung AT&T commodities houses can be double what Wall 0 Street banks pay,” says George Stein of New Consumer Autos Financials Commodity Technology Telecoms York headhunting firm Commodity Talent. Staples trading companies Switzerland-based Glencore, whose initial Source: Thomson Reuters public offering (IPO) in May put trading houses Reuters graphic/Scott Barber 06/10/11 in the spotlight, pays some traders yearly bonuses in the tens of millions. On paper, the billion in 2010 were twice those at Apple Inc. the deepest pockets, and the best risk partial float made boss Ivan Glasenberg $10 As well as the 200 tankers it has at sea, Vitol management.” billion richer overnight. owns storage tanks on five continents. In addition to proprietary trading curbs, U.S. regulations are now pending to limit the U.S. regulator voted on Oct. 19 to impose HOW BIG ARE the biggest trading houses? Put banks’ proprietary trading -- speculating with position limits in oil and metals markets. it this way: two of them, Vitol and , their own cash. The new rules don’t apply to That gives banks who trade futures cause for sold a combined 8.1 million barrels a day of trading firms. “Trading houses have huge concern, but since physical players usually oil last year. That’s equal to the combined oil volumes of proprietary trading. In some cases receive exemptions to limits -- because they exports of Saudi Arabia and Venezuela. it makes up 60-80 percent of what they do,” are categorized as bona fide hedgers -- Or this: Glencore in 2010 controlled 55 said Carl Holland, a former price risk manager trading firms should go unscathed. percent of the world’s traded zinc market, and at oil major Chevron , who now runs The trading houses’ talent and deep 36 percent of that for copper. energy consultancy Trading Solutions LLC pockets translate into incredible power. Or this: publicity-shy Vitol’s sales of $195 in Connecticut. “They have the most talent, “Most commodity buyers in the world are price takers. The top trading firms are price makers,” said Chris Hinde, editor of - Food and fuel kings based Mining Journal. “It puts them in a tremendous position.” Largest commodities trading houses by revenue The sort of position that has allowed 2010 revenue - $ billion Vitol to do a brisk oil business with the U.S. Vitol 195 government, the besieged Syrian regime, Glencore 145 and Libya’s newly empowered rebels Cargill 108 simultaneously over the past few months. In Koch Industries 100 April the company dodged NATO bombs and ADM 81 a naval blockade and sent an oil tanker into Gunvor 80 the battered Mediterranean port of Tobruk to Trafigura 79 extract the first cargo of premium crude sold Mercuria 75 by rebels at the helm of a breakaway Libyan oil Predominantly trades: Noble Group 57 Energy company defying Muammar Gaddafi. Louis Dreyfus 46 Agriculture Vitol also discreetly supplied Libya’s rebels Metals or cross-commodities Bunge 46 with $1 billion in fuel, Reuters has learned -- supplies they desperately needed to advance Wilmar International 30 on Tripoli. Vitol’s early running gave the firm Arcadia* 29 an edge with the country’s new political Mabanaft* 15 stewards. As it turns the pumps back on, Olam 11 Libyan oil firm Agoco has allocated Vitol half Hin Leong 8 of its crude production to repay debts. While its savvy traders were doing deals in *Estimate Source: Thomson Reuters, Company reports eastern Libya, Vitol, along with rival Trafigura,

Reuters graphic/Vincent Flasseur 17/10/11 2 TRADING HOUSES october 2011 kept refined product supplies flowing to the And it’s not just the Europeans. Executives a global price benchmark -- fell to 400,000 besieged government of Bashar al-Assad in of Illinois-based ADM, formerly Archer barrels per day from more than 1 million in the Syria as his troops attacked civilians. Trading Daniels Midland, were jailed for an early late 1980s. A few traders seized the chance to houses were able to do this because international 1990s international price-fixing conspiracy for buy what amounted to almost all the available sanctions on Syria do not ban the sale of fuel into animal feed additive lysine. After Minnesota- supply. Price premiums for immediate the country, but they did not have to fight off based Cargill built a huge soybean terminal supply spiked, sapping margins for refiners much competition for that business. on the banks of the Amazon River in 2003, it worldwide. U.S. refiner Tosco sued Arcadia was targeted by Greenpeace and subjected to and Glencore for market manipulation; the DESPITE A RELATIVE lack of regulatory Brazilian government injunctions for allegedly case was settled out of court. oversight, such reach does In metals, stock in warehouses attract scrutiny. “There has can be tied up for years as loan always been some concern collateral, allowing the same about the trading firms’ traders who dominate the metals influence,” said Craig Pirrong, market to control a huge chunk a finance professor and of world supply -- an apparent commodities specialist at conflict of interest that has drawn the University of Houston, criticism from the UK parliament. who points out that some “The warehouses seem to have firms “have been associated an infinite capacity to absorb with allegations of market metal, but a very small capacity manipulation”. to release it,” said Nick Madden Public and regulatory of Novelis, the world’s top rolled attention usually rises with aluminium producer. prices. A spike in world food Trading houses saw the opportunity prices in 2007 stirred an to leverage metals warehousing after outcry against the largest the 2008 financial crisis. Of the six grain trading firms; when major metals warehousers only one, oil prices surged to a record Dutch-based C.Steinweg, remains $147 a barrel in 2008, U.S. independent. Trading houses Congress probed the role of competed with banks for the spoils -- oil trading firms, but found Glencore, Trafigura and Noble took no smoking gun. But in May one warehousing company each, the U.S. Commodity Futures Goldman and JP Morgan the others. Trading Commission sued And unlike commodities Arcadia and Parnon, both producers, such as U.S. oil giant owned by a Norwegian Exxon Mobil, trading firms don’t shipping billionaire, for just make money when prices allegedly manipulating go up. Most rely on arbitrage -- U.S. oil prices three years playing the divergence in prices ago, amassing millions of at different locations, between barrels they had no intention different future delivery dates, or of using. The companies between a commodity’s quality in dispute the charges. different places. Some transgressions That’s what Koch, Vitol and make headlines. A Trafigura- others did in 2009 when they chartered tanker was parked 100 million barrels of intercepted in the Caribbean in oil in seaborne tankers. Thanks 2001 on suspicion of carrying to a market condition known as illegal volumes of Iraqi crude. contango -- a period when buyers In a settlement, Trafigura BEANS: A worker stands on sacks of cocoa in the port of Abidjan last May. Ivory Coast’s pay more for future delivery than cocoa exports were halted by a violent political crisis. Commodity traders use such events agreed to pay a $5 million as a way to make money -- or increase access to power brokers. REUTERS/luc gnago to receive their cargoes promptly fine, but wasn’t charged with -- they could sell futures and lock smuggling and denied wrongdoing. In 2006 a encouraging more farming in fragile rainforest. in profits of $10 a barrel or more. tanker it chartered dumped toxic waste in Ivory Cargill has since placed a moratorium on Coast, allegedly making thousands ill and killing buying soybeans from newly deforested land. MANY OF THE BIGGEST players in oil and up to 16. Courts did not find any connection FOR MANY COMMODITIES traders, the metals trading trace their roots back to between its waste and sick people. Trafigura most profitable ploy has been the squeeze, notorious trader Marc Rich, whose triumph took legal action to keep a report about the Ivory which involves driving prices up or down by in the 1960s and 70s was to create a spot Coast incident out of newspapers, but details accumulating a dominant position. In the early market for oil, wresting business away from were eventually made public. 2000s, the Brent crude oil stream -- used as the majors.

3 TRADING HOUSES october 2011

Belgian-born Rich joined Philipp Brothers, But earlier this year the world’s wealthiest “Vitol’s goal was to supply the refined subsequently Phibro, aged 20, leaving in 1974 oil trader raised that profile, and did its products and then try to pick up upstream assets with a fellow graduate of the Phibro mailroom, reputation no harm, by becoming the first in Libya,” said a western diplomatic source. Pincus “Pinky” Green, to to set up Marc Rich to deal with Libya’s rebels, long before the Glencore’s flotation has sparked speculation and Co AG in Switzerland. overthrow of Muammar Gaddafi. about a possible Vitol initial public offering and Rich, now 76, would later end up on the FBI’s That helped balance the reputational what it would be worth. Vitol says it is happy most-wanted list for alleged tax evasion and damage of being fined -- along with many other with its private status and has no IPO plans. trading oil from Iran after the revolution in 1979. companies -- for paying surcharges a decade He was later pardoned. His partners seized ago to Saddam Hussein’s Iraqi oil ministry “china is becoming control of the firm in 1994, renaming it Glencore. during the U.N. oil-for-food programme. Several big trading houses are still family- Vitol’s Saddam connection does not seem to more like a held -- firms like agricultural giant Cargill, the have hurt it in Iraq. It became the first company glencore.” top private U.S. company, or Kansas-based to supply gasoline to the energy ministry after Koch Industries, a close No. 2. Koch’s chief the war in 2003, and now is both a buyer of Iraqi By annual revenue Vitol is richer than executive Charles Koch, a libertarian activist crude and supplier of refined products. Glencore but the numbers aren’t directly with a $22 billion personal fortune according An array of storage tanks on five continents comparable -- Glencore owns more hard to Forbes, has said his company would go oils the wheels of its vast trading operation and assets which, typically, are far more profitable public “over my dead body”. “The thinking it has stepped into the gap left by the oil majors than trade turnover. is, why open the books to the world?” said as they reduce their downstream presence to Vitol’s wealth is spread across only 330 share- a former lobbyist for Koch who requested focus on upstream exploration and production. holding employees, fewer than Glencore’s anonymity. “Koch benefits from privacy, and With African investors Helios Investment it 500. While Vitol would not comment, industry it’s astonishingly agile and profitable as is.” recently paid a billion dollars to buy Shell’s talk has it that none of its senior employees, The old guard now faces a challenge from fuel marketing operation across 14 West including CEO Ian Taylor who joined from a new breed of Asian competitors. Companies African countries, keeping the Shell branding. Shell in 1985 or long-timer Bob Finch who like Hong Kong-based Noble and ’s It has also dipped a toe in the upstream heads Vitol’s coal business, holds more than 5 Olam and Hin Leong are not new, but they are business. Together with Glencore, it pre-qualified percent of the company. That would put them spreading their wings as China’s influence in to bid for exploration rights in Iraq in a licensing well below the 16 percent stake Glencore CEO commodities markets increases. Chinese state round next year that that could add the Iraqi Ivan Glasenberg owns in his firm. funds have flowed into Noble and private upstream to its offshore West Africa operations. The company’s deal with Libya’s rebels was Asian traders. Its early dealings with the Libyan rebels a gamble. Sanctions targeted Gaddafi. The As China’s clout grows, it’s very likely that may offer the chance of a foothold in Libya’s firms now controlled by the western-backed Chinese firms will build trading dynasties oil and gas territory. rebels might still legally be linked to Libya’s of their own. In a move borrowed from the national oil corporation. Was Vitol in violation? playbooks of western rivals, state-run oil firm Lawyers said doing business with the rebels PetroChina has set up a Houston oil trading still required great care. But by the end of desk and leased massive oil storage tanks in April, a U.S. Treasury directive authorised the the Caribbean. “China is becoming more like Vitol transactions. a Glencore,” said Hinde. “The Chinese state is “They sail as close to the wind as they funding nimble trading firms to do its bidding. possibly can legally,” said an oil analyst who We don’t hear much about them yet, but in requested anonymity. “That’s the nature of time we will.” their business.” Here’s a look at the 16 companies, with (Richard Mably, with reporting by Barbara aggregate revenues of $1.1 trillion, that trade Lewis) energy, metals and agriculture.

SAILING CLOSE TO THE WIND PRIVATE TO PUBLIC WHO: Vitol, founded 1966 in Rotterdam by WHO: Glencore, founded 1974 as Marc Rich Henk Vietor and Jacques Detiger and Co. renamed Glencore in 1994 WHERE: Geneva and Rotterdam WHERE: Baar, Switzerland WHAT: Oil, gas, power, coal, industrial metals, WHAT: Metals, minerals, energy, agricultural sugar products TURNOVER: $195 billion (2010) REVENUE: $145 billion in 2010 CEO: Ian Taylor CEO: Ivan Glasenberg STAFF: 2,700 STAFF: 2,800 people directly; 55,000 at Glencore’s industrial assets ON THE WORLD OIL markets the name Vitol FRONT LINE: Vitol bought the Libyan rebels’ first is as familiar as Exxon is at the petrol pump. premium crude cargo, aboard the Greek-owned SWITZERLAND-BASED Glencore cast aside oil tanker Equator, seen here at Marsa el Hariga In public, for a company that turned over in April, 2011. By the end of April, a U.S. Treasury its famed secrecy earlier this year with a record almost $200 billion last year trading 5.5 million directive authorised the trade. REUTERS/Andrew market debut that turned its executives into barrels a day, its profile is nigh on subterranean. Winning/Denis Balibouse paper millionaires and propelled the firm into

4 TRADING HOUSES october 2011 BACK-HAUL MASTERS WHO: Cargill, founded 1865 by William Wallace Cargill at the end of the U.S. Civil War WHERE: Minneapolis, Minnesota WHAT: Grains, oilseeds, salt, fertilizers, metals, energy TURNOVER: $108 billion (2010) CEO: Greg Page STAFF: 130,000

TUCKED AWAY IN a private forest an hour’s drive from the downtown high rises of mid- western Minnesota stands a brick mansion that strikes most visitors the same way: isolated, solid, regal, powerful. Inside the “lake office,” as it is known, sits the chairman of Cargill Inc., one of the largest privately held companies in the world. Over the last 145 years, Cargill has grown from a single grain storage warehouse by an Iowa railroad to a behemoth of world commodities trade, straddling dozens of METAL GURU: Glencore is one of the largest physical suppliers of metals. A copper shipment in Valpariso City, Chile, 2009. REUTERS/Eliseo Fernandez markets for food and other essential materials -- salt, fertilizer, metals. With global sales of $108 billion in 2010, the headlines. The company’s largest shareholder is now Cargill would have ranked No. 13 in the Fortune Founded in 1974 by Marc Rich, who fell foul former coal trader and Chief Executive Ivan 500 list of publicly held companies, just of U.S. authorities but was later pardoned by Glasenberg, an intense and charismatic South behind Wall Street banking giant Citigroup. President Bill Clinton, Glencore has assets African who holds a stake of just under 16 But Cargill is anything but public. Despite spanning the globe and an oil division with percent, worth around 4.5 billion pounds at a concerted campaign in recent years to more ships than Britain’s Royal Navy. Top current prices. put forth a friendlier face and personality officials in many other large trading companies Still not entirely comfortable with his public through advertising and more appearances began their careers at Glencore. profile, Glasenberg has described his shift into by its executives in public forums, Cargill is The company handles 3 percent of the the glare of publicity as “crossing the Rubicon”. bound together by a culture of confidentiality, world’s daily oil consumption. It’s one of the He is flanked in the top investor table by the aggressiveness -- and winning. largest physical suppliers of metals including youthful heads of Glencore’s major divisions. “By and large they move as a team,” says zinc, lead and nickel, and a leading grain Together, Glencore employees, including one retired wheat trader who did business exporter from Europe, the former Soviet Union many of its top traders, own just under 80 with Cargill for decades. “They have some and . percent of the company. superstars but mostly a lot of team players Though it began as a pure metals and Glencore has long made its fortune by -- what I would describe as well grounded, oil trader, Glencore has bought a wealth of working on the fringes and in areas where fundamental traders.” industrial assets since the late 1980s which few others dared. That strategy has often One of their secrets: filling the now stretches from South American farmland succeeded, though last month it found itself empty barges headed home. to copper mines in Zambia. at the centre of a dispute in the newly minted “You’ve always had grain going down the Belgium-born Rich sold his stake in 1994. nation of South Sudan. A row over oil export river and going through the Gulf and being control could jeopardize its role in selling the exported. One of the great things that Cargill nation’s crude. did was develop the salt business to transport Glencore’s initial public offering was the back up, eliminate the snow during the largest globally this year, attracting huge wintertime, and fill barges back up with back publicity as well as arguments that it marked hauls,” the wheat trader said. the top of the commodities cycle. The shares “It was done a long time ago. People forget listed at 530 pence in May but have since about it. But it was absolutely one of the traded below that, dropping almost a quarter greatest moves in the business.” in three months. Cargill hopes to dominate new markets as A large part of Glencore’s market value well. Two examples: it makes biodegradable comes from its listed stakes in other and recyclable plastics out of corn at its $1 billion companies, most notably a 34.5 percent complex at Blair, Nebraska, and is creating holding in Swiss miner Xstrata. Glencore has new low-calorie food ingredients for such said publicly it would see “good value” in a WEALTH GENERATION: Glencore CEO Ivan multinationals as Kraft, Nestle and Coca Cola. Glasenberg prefers to stay out of the limelight. merger with Xstrata, but that has so far been REUTERS/Tyrone Siu rejected by other, smaller, shareholders. AT TIMES CARGILL’S power has got it into (Clara Ferreira Marques) 5 TRADING HOUSES october 2011 trouble. In 1937 the Chicago Board of Trade governments... Additionally, we don’t believe owns a 4,000-mile U.S. pipeline network and forced the company to sell its corn contracts export bans are the solution to either high three of the country’s most profitable refineries. and Secretary of Agriculture Henry Wallace grain prices or price volatility.” ADM declined Many small producers rely almost entirely accused it of trying to “corner” the U.S. corn to comment and a spokesman for Bunge on Koch to buy, sell and ship their crude. The market. In 1972 Cargill came under attack as could not be reached. company now operates in 60 countries. it secretly sold millions of tonnes of wheat to (Christine Stebbins) The Koch brothers, Chairman and CEO Russia, using a U.S. export subsidy program to Charles and co-owner David Koch, are boot -- and boosting food inflation. high-profile supporters of libertarian It helps that the firm usually has the backing and anti-regulation U.S. politics. Among of Washington. In early 2007, when world THE ‘KOCHTOPUS’ their campaigns is one to end the U.S. grain prices were surging towards all-time WHO: Koch Industries, founded 1920s by Fred Environmental Protection Agency’s mandate highs, it faced a problem in Ukraine. Citing Koch for regulating greenhouse gas emissions. A concerns over potential shortages and rising WHERE: Wichita, Kansas profile in the New Yorker magazine last year bread prices, Kiev had placed export quotas on WHAT: Oil identified the brothers as behind-the-scenes cash crops and temporarily stopped granting TURNOVER: $100 billion (2010) operators who bankroll the U.S. Tea Party export licenses for corn, wheat, barley and CEO: Charles Koch movement. The Kochs have denied funding other grains. STAFF: 70,000 the Tea Party, but their empire’s far-reaching Cargill, as well as fellow U.S. commodity tentacles in the political arena have spawned trading firms Bunge and ADM, “agreed to FOUNDED IN THE 1920S by patriarch Fred a nickname: the ‘Kochtopus’. undertake a public relations effort with the Koch, a U.S. engineer who developed a new The firm’s traders, according to two industry goal of creating a political problem for the method of converting oil into gasoline, Koch sources, made a fortune for Koch in 2009- Government of Ukraine”, according to a 2007 helped to build a refining network in the Soviet 10 during a contango in U.S. oil markets -- a diplomatic cable by the U.S. ambassador to Union in the 1930s. Fred Koch returned to the period when oil for future delivery was higher Ukraine that was obtained by WikiLeaks and United States with a visceral hatred for Joseph priced than immediate cargoes. Koch moved made available to Reuters by a third party. Stalin and communism. A fiercely libertarian quietly to lead a boom in U.S. offshore crude To achieve this, “it would be necessary to ideology and ultra-competitive engineering storage, buying millions of barrels at cheap recruit the (Ukrainian) farmers to take an prowess live on at Koch Industries’ spartan spot prices, parking them in supertankers near active role. This would be a challenge, since headquarters in Wichita, Kansas, a former its Gulf Coast pipelines, and simultaneously small farmers were unorganized, and most Koch executive told Reuters. selling into futures markets. had already cashed in their crops by selling With around $100 billion in sales, Koch With Koch’s easy access to tankers and to the traders early... Grain traders welcomed Industries is a heavyweight among U.S. oil pipelines, the strategy locked in profits of up our offer to lend a diplomatic hand,” the trading firms, and one of the most secretive to $10 a barrel with virtually no risk, traders ambassador wrote. U.S. corporations. Investors can forget about said. When spot and futures prices began to Asked to comment, Cargill said the buying shares in the wildly profitable, family- converge, Koch would quietly slip crude from company actively backs free trade to boost run firm any time soon. the ships into its onshore pipelines. Koch agriculture in all countries and “is in dialogue In oil markets, Koch is a brutally efficient declined to discuss its trading with Reuters. with many important audiences, including middleman. A master of physical markets, it Former Koch employees were implicated in improper payments to secure contracts in six foreign countries between 2002 and 2008, and the company’s officers admitted in a letter made public by a French court last year that “those activities constitute violations of criminal law”, according to a report in Bloomberg Markets Magazine this month. The report also details sales by a foreign Koch subsidiary of petrochemical equipment to Iran, which is subject to U.S. sanctions, and a history of criminal or civil penalties for oil spills, a deadly 1996 U.S. pipeline blast, and under-reporting of emissions of benzene, a carcinogen, from a Texas refinery in 1995. On its website Koch said it dismissed several employees of a French subsidiary upon learning of the improper and unauthorized payments. It also said its foreign units had ended sales to Iran “years ago”, and did not violate U.S. law by conducting business with Iran earlier. Koch said its 90s-era pipeline blast was “the only event of its kind” in the company’s history, and KEEPING COUNT: A meter measuring barrels of oil sold aboard Chevron’s Petronius oil platform, 100 miles that a report to Texas regulators was voluntarily (161km) off the coast of New Orleans. REUTERS/Jessica Rinaldi 6 TRADING HOUSES october 2011

submitted by the company in 1995 to reflect around the world. the commodity risk that can be created by the higher emissions than it had originally reported. A small Minnesota linseed crushing business timing differences between those buys and Koch eventually pleaded guilty in 2001 to a more than a century ago, the firm is now is so sells,” said Steve Mills, ADM’s senior executive felony charge related to its reporting of the big its financial performance is often viewed vice president for performance and growth. benzene emissions. as a barometer of agribusiness as a whole. It “You’ll hear things through the The firm’s far-ranging industrial interests also owns processing plants, railcars, trucks, river marketplace or the wire services that it’s include chemicals, forestry, ethanol, carbon barges and ships. It has trading offices in raining someplace or not raining someplace trading and ranching. Its huge and we’ll have people on the lobbying budget in Washington ground saying ‘I don’t know -- estimated at $10.3 million a what you’re talking about’ ... year in a recent investigation by The futures market may take the Center for Public Integrity some of that information and -- stands in contrast to Charles run with it. One of the things Koch’s frugal demeanor within that gives us an advantage the firm. is that we’re working in the The CEO sometimes flies to physical markets as well speaking engagements with so (we can) absorb all that no entourage. When in Wichita, information and make the he often dines in the Koch calls.” cafeteria. When out-of-town But ADM’s reputation has employees visit, he has taken endured a black eye or two over them to dinner at seafood chain the years. Red Lobster, a former Koch A lysine price-fixing scandal employee said. “But make no in 1993 tarred its name after mistake, if you perform well at three top executives were Koch, you are richly rewarded indicted and imprisoned. ADM in salary terms,” the person was fined $100 million by the added. “And if you don’t, you’re U.S. government for antitrust out of there fast.” violations. The incident was (Joshua Schneyer) the subject of “The Informant”, filmed on site in Decatur. ADM’s environmental record has also been questioned by CORN BELT KINGS the Environmental Protection WHO: ADM, formerly Archer Agency, resulting in fines and Daniels Midland, founded 1902 forced installation of pollution by John Daniels and George control measures. Archer. (Karl Plume) BASED: Decatur, Illinois TRADES: Grains, oilseeds, cocoa TURNOVER: $81 billion (2010) JUDO, CONSPIRACIES WHO: Gunvor, founded 1997 CEO: Patricia Woertz by Swedish oil trader Torbjorn STAFF: 30,000 Tornqvist and Russian/ Finnish businessman Gennady “CORN GOES IN ONE end and Timchenko profit comes out the other.” WHERE: Geneva That comment, by Matt WHAT: Oil, coal, LNG, emissions Damon’s character Marc TURNOVER: $80 billion 2011, Whitacre in the 2009 corporate company estimate ($65 billion scandal film “The Informant”, CROP TIME: Workers at a farm in Correntina, Bahia in 2010. Brazilian farmers are 2010) described how U.S. agricultural spending like never before on farm equipment, fertilizer and other investment. CHAIRMAN: Torbjorn Tornqvist firm Archer Daniels Midland REUTERS/PAULO WHITAKER/FILES STAFF: Fewer than 500 Co. turned grain into gold. The

line may be simplistic but it’s China, palm plantations and chemical plants WHEN IT COMES TO his critics, Vladimir Putin not too far from the truth. across Asia, and silos in Brazil. is a heavyweight puncher. Yet it took Russia’s Decatur, Illinois-based ADM is one of the “We have a system that monitors the supply most influential politician almost a decade world’s biggest commodities traders. It buys and demand needs, because often times they to publicly address one of the most serious and sells multiple crops, mills and grinds and are working independently. For us in the allegations against him. processes them into scores of products, both middle, we have the ability then to manage Critics, including the Russian opposition, edible and not, and ships them to markets 7 TRADING HOUSES october 2011 put it simply -- Russia’s paramount leader and excellent contacts. Gunvor’s oil dominance has waned in the helped businessman Gennady Timchenko “But ... to involve Mr Putin and any of his past two years -- it is handling around a fifth create the Gunvor oil trading empire, which staff in this dialogue is speculation,” he added. of Russian seaborne oil exports, down from saw a spectacular rise in the past decade when That comment didn’t help calm rumours and a third three years ago. Perhaps to make up Putin was president and then prime minister. then Timchenko spoke too. for that, it has moved into new sectors such as Putin finally broke his silence last month: “I After a newspaper interview he wrote an natural gas, coal and emissions. assure you, I know that a lot is being written open letter in 2008 headlined “Gunvor, Putin Tornqvist says Gunvor’s goal is to become about it, without any participation on my part. and me: the truth about a Russian oil trader”. a truly global company. “We know how to “I have known the citizen Timchenko “It is true that I, together with three other close the gap (with Vitol and Glencore) and we for a very long time, since my work in St businessmen, sponsored a judo club where Mr are actively catching up,” Tornqvist said. Like Petersburg,” Putin told a group of Russian Putin became honorary president,” he wrote. Vitol, he says, Gunvor has no plans to follow writers. Putin worked in the mayor’s office “That is as far as it goes -- yet time and again, Glencore into an IPO. in the early 1990s when Timchenko and his the media wrongly jump to the conclusion that (Dmitry Zhdannikov) friends, Putin said, spun off an oil trading unit the judo club connection means that Mr Putin of the Kirishi oil refinery. and I are ‘close’, then leap into conspiracy- THE RICH LINK “I never interfered with anything related to theory mode.” WHO: Trafigura, founded 1993 by former Marc his business interests, I hope he will not stick Tornqvist, a former BP trader and keen Rich traders Claude Dauphin, Eric de Turkheim his nose into my business either,” Putin said. yachtsman, says he doesn’t share the vision and Graham Sharp Timchenko doesn’t need to be told to keep a of Mark Rich, the father of contemporary WHERE: Geneva, Switzerland low profile. He is one of Russia’s most private trading, that political links are the most prized WHAT: Oil, metals tycoons. And his silence helped feed rumors asset in trading. TURNOVER: $79 billion (2010) about Gunvor’s remarkable growth. “If you don’t offer competitive terms, no CHAIRMAN: Claude Dauphin In 2011 the company will turn over $80 one will work with you,” he told a Russian STAFF: 6,000 billion, up from just $5 billion in 2004. In daily this month. For Gunvor’s rivals, too, his first public interview to Reuters in 2007, favoritism is also an overly simple explanation THE GODFATHER OF OIL trading, Marc Rich, Gunvor’s Swedish co-founder Tornbjorn of the company’s success. They point to very taught one of his most talented apprentices Tornqvist was keen to stress that the firm’s competitive pricing offered by Gunvor when it Claude Dauphin almost every trick in the success was built on its traders’ experience comes to Russian oil tenders. “the media wrongly jumped to the conclusion that the judo club connection means that Mr putin and i are close.”

SPECULATION: Russia’s Prime Minister Vladimir Putin, has denied helping Gunvor’s rise. Here, he is flanked by Evgeny Muravyov (2nd R), director of the Polar Division of Russian metals giant Norilsk Nickel as well as Norilsk Nickel’s General Director and Chairman of the Management Board Vladimir Strzhalkovsky (2nd L), during a visit to the company’s copper plant in the Arctic city of Norilsk August 31, 2010. REUTERS/Alexei Nikolsky/Ria Novosti/Pool

8 TRADING HOUSES october 2011

and Graham Sharp. Like rival Vitol, Trafigura has seized the opportunity to get into oil storage as oil majors focus on production. It announced in early October that it may float its storage subsidiary Puma Energy within 18 months. Trafigura was also quick to recognise the potential of storage in the industrial metals markets. It bought UK-based metals warehouser and logistics firm NEMS in March 2010, a month after Goldman Sachs had acquired rival Metro and several months before Glencore and JP Morgan moved into the business. (Dmitry Zhdannikov and Ikuko Kurahone)

SEVEN-YEAR-OLD IN BIG LEAGUE WHO: Mercuria, founded in 2004 WHERE: Geneva WHAT: Energy TOXIC: Yao Pipira Denis, president of the National Federation of Victims of Toxic Waste in Ivory Coast, shows TURNOVER: $75 billion 2011 company journalists where waste was stored in the suburbs of Abidjan, August 2011. REUTERS/thierry gouegnon estimate (2010, $47 billion) business. Like Rich, Dauphin created a leading toxic waste dumping. CEO: Marco Dunand commodities trading house by applying a Shortly after the material was dumped, knife-edge approach to business. He has thousands of residents of the city of Abidjan MERCURIA IS JUST SEVEN years old, but is made a fortune. complained of illnesses, including breathing already one of the world’s top five energy traders. But there was one lesson that Rich must problems, skin irritation and related ailments. The Headquartered in Geneva, Switzerland, and have cut short: how to avoid jail. While Rich government of Ivory Coast said 16 people died. named after Mercury, the god of merchants, himself fled to Europe in the 1980s to escape The material was dumped in open-air sites Mercuria’s business straddles global energy possible imprisonment for tax evasion in the around Abidjan in August 2006 after being markets. United States, Dauphin spent almost six unloaded from a Trafigura-chartered tanker. It has coal mines in Kalimantan in Indonesia, months behind bars in Ivory Coast in 2006-7 Trafigura said it entrusted the waste to a oilfields in and Canada plus oil in pre-trial detention involving a dispute over state-registered Ivorian company, Tommy, trading in Singapore, Chicago, Houston and which dumped the material illegally at sites across Europe. around Abidjan. Its meteoric growth has been piloted by a “We went to the Ivory Coast on a mission couple of the sharpest minds in commodities. to help the people of Abidjan, and to find Marco Dunand and Daniel Jaeggi, both ourselves arrested and in jail as a result has Swiss, have worked together closely for more been a terrible ordeal for ourselves and our than 25 years in a string of commodities families,” said Dauphin. companies, buying and selling crude and oil Trafigura paid a $200 million settlement products in many of the hottest oil trading and the country’s prosecutor declared that outfits: Cargill, Goldman Sachs’ J.Aron, there was no evidence of any illegality or Salomon Brothers’ Phibro and Sempra. misconduct by any Trafigura company or staff. In two decades of oil trading, Dunand and In London, Trafigura reached a pre-trial Jaeggi built fearsome reputations for seeing settlement to put an end to a class-action suit profit margins where others could only see from some 31,000 residents. potential losses. They were early dealers The judge said there was no evidence the in a range of financial derivatives that are waste had caused anything more than “flu- now commonplace and brought a level of like symptoms” and said some media had sophistication to their trading books that most been irresponsible in their reporting. of their competitors could often only envy. The scandal has hardly hampered the firm’s “You were always a little worried, taking stellar growth. the other side of their trades,” said one It has grown into the world’s third-largest European oil product trader, who declined to independent oil trader and second-largest be identified. industrial metals trader in less than 20 years, Compared with other independent trading MENTOR Swiss billionaire Marc Rich receives an since it was set up in the early 1990s by houses, Dunand and Jaeggi are high profile, honorary doctorates from Bar-Ilan University in Tel speaking periodically to the press and giving Aviv May 15, 2007. REUTERS/Gil Cohen Magen Dauphin and fellow traders Eric de Turckheim 9 TRADING HOUSES october 2011 regular interviews. Their move to run their own empire came in 2004 when they founded Mercuria, raising capital from two Polish businessmen, Grzegorz Jankielewicz and Slawomir Smolokowski. Jankielewicz and Smolokowski’s company, J+S Group, traded Russian crude oil and was a leading supplier of oil to PKN Orlen, Poland’s top oil refiner. In 2006, J+S was raided by the Polish authorities in connection with an investigation into oil trading in Poland. J+S denied any wrong- doing and suggested the investigation was politically motivated. No suggestions of wrong- doing were levelled against Dunand or Jaeggi. Dunand, chairman and chief executive, and Jaeggi, head of global trading, used Mercuria to expand their trading base from crude and oil products. The business has grown to 890 employees in 28 countries with a turnover at $75 billion, trading almost 120 million tonnes of oil, coal and gas. Dunand says he and Jaeggi have no intention of selling the company they have built so swiftly, LISTING: Noble Group CEO Richard Elman in Hong Kong, 2008. Elman began his career in a scrap yard in England at the age of 15. The group now plans to float its agriculture business. REUTERS/Bobby yip or launching an initial public share offering (IPO). But they have seen interest from potential Corp., which bought an $850 million stake in transaction the amount of fuel submitted for investors, and have considered a tie-up with a 2009, and Korean Investment Corp., which subsidies did not match the actual quantity sovereign wealth fund. has a minority stake. delivered. The company did not comment “We are not thinking about an IPO -- but that Elman, the company’s chairman, holds publicly on this incident. doesn’t mean we don’t have an open mind,” around 30 percent of the company. After And it sounded a rare retreat this week when Dunand told Reuters in June. “We are keen to dropping out of school he began his career sources close to the company said it had shut consolidate our culture before we could think at 15 in a metals scrap yard in the UK. He its European coal trading operations to focus about changing it. Having said that, we have spent time trading metal in Hong Kong before on Asia and trading. also been approached by potential investors moving to New York and a stint at commodities The China connection continues. In April -- sovereign funds and others -- who wish to trading giant Phibro. Back in Hong Kong, he Noble appointed Li Rongrong, former make a private-equity type of investment in traded commodities with China in the 1970s chairman of the state-owned assets our company.” and was the first to sell China’s Daqing crude supervision and administration commission of Dunand and Jaeggi are Mercuria’s largest oil to the United States. China, as a non-executive director. shareholders but an employee share Noble has grown by acquiring troubled (Luke R. Pachymuthu) ownership scheme holds around 40 percent of competitors. In 2001, for instance, it bought the company. “We don’t see the need to raise storied Swiss company Andre & Cie, once one of money from the market,” Dunand said. the world’s top five grains traders. Finding itself (Christopher Johnson) with a big client base, but short of the physical PRIVATE FIRM, PUBLIC SPAT supplies it needed to meet demand, Noble built WHO: Louis Dreyfus, founded 1851 by Leopold its own processing facilities. It’s a model it has Louis-Dreyfus A BRIT IN HONG KONG replicated across various commodities. WHERE: Paris WHO: Noble Group, founded 1986 by UK scrap Noble is now seeking to spin off its WHAT: Cotton, rice, grains, orange juice metal man Richard Elman agriculture business with a listing on the TURNOVER: $46 billion (2010) WHERE: Hong Kong Singapore Exchange. The grains business CEO: Serge Schoen WHAT: Sugar, coal, oil accounts for a third of its earnings and could STAFF: 34,000 TURNOVER: $57 billion (2010) have a value of more than $5 billion. Wall EXECUTIVE CHAIRMAN: Richard Elman Street heavyweight JP Morgan is advising IN THE TWO YEARS SINCE Margarita Louis- STAFF: 11,000 Noble on the planned listing. Dreyfus inherited control of the world’s top The company’s early forays into trading cotton and rice trader following the death of FOUNDED 25 YEARS AGO by Briton Richard gas and oil left it with a black eye. Noble her husband Robert, the woman the French Elman, the Hong Kong-based, Singapore- quit its global liquefied petroleum gas (LPG) press call “the tsarina” has been at the centre listed Noble Group buys and sells everything operations in 2010, a year it was censured in of one of the most intriguing struggles in from Brazilian sugar to Australian coal. Nigeria for discrepancies in gasoline shipping corporate Europe. Noble’s shareholders include China’s lists. Nigeria’s Petroleum Product Pricing Analysts and commentators focused on sovereign wealth fund, China Investment Regulatory Agency (PPPRA) said that in one differences between the forty-something, 10 TRADING HOUSES october 2011

SPINOFFS: A worker with fused non-ferrous metals at the copper plant of the Norilsk Nickel company in Russia’s Arctic city of Norilsk, April 2010.REUTERS/Ilya Naymushin

Russian-born Margarita Louis-Dreyfus and chief executive Jacques Veyrat over how to develop the 160-year- old family firm and whether to list its shares or seek a merger deal. The winner? The tsarina, or MLD, as the press sometimes also calls her. In April, she and Veyrat told business daily Les Echos that the CEO would be stepping down to make way for Serge Schoen, head of Louis Dreyfus Commodities. The very public power struggle was all the more remarkable because the company the commodity trading space.” a message that could apply just as well to the normally keeps everything, from its precise It doesn’t look likely anytime soon. “There is no Louis Dreyfus group. earnings to the exact age of its main shareholder rush, the company has been private for 150 years (Gus Trompiz, with reporting by Jean- and chairwoman, a secret. so there is no specific timing for changing the Francois Rosnoblet) Louis Dreyfus is a well-honed global shareholding structure,” one source close to the operator, marketing agricultural commodities company said. from wheat to orange juice. But most analysts A management shake-up this year at think it needs fresh capital to grow, or to buy France’s most popular football club, Olympique CASHING IN ON CHINESE PIGS out minority family shareholders who will have Marseille, offers more proof of Margarita WHO: Bunge, founded 1818 by Johann Peter the option to sell their stakes in 2012. Louis-Dreyfus’ determination to Gottlieb Bunge in Amsterdam Unsuccessful talks have taken place with defend her husband’s legacy WHERE: White Plains, New York. Singaporean commodities group Olam and impose hard financial TRADES: Grains, oilseeds, sugar International Ltd, while bankers say they have choices. TURNOVER: $46 billion (2010) been sounded out about a stock market listing. While pursuing Robert CHAIRMAN and CEO: Alberto Weissner Margarita Louis-Dreyfus told Les Echos Louis-Dreyfus’ passion STAFF: 32,000 that a listing, merger or the entry of a private for the club, which investor were all options. But there’s little drained millions from TWO DECADES AGO, Chinese farmers room for maneuver: the majority stake she his fortune, she fed their pigs just about anything they inherited is locked up in a trust her husband has placed strict could lay their hands on. But since set up to last for 99 years. conditions on new White Plains, New York-based Bunge “There is no ideal solution. What matters is investment. set up in China in 1998, many have that the group and its name survive,” she said. “Olympique switched to soy pellets. Result: In the wake of Glencore’s listing this year, Marseille is at China’s pigs are heavier than there is interest in another big trading house a crossroads,” ever and Bunge has become going public; investors want exposure to long- she told term demand for commodities. supporters in TSARINA: Margarita Louis- “I would love for them to be listed on the stock a statement Dreyfus attends a French Ligue market,” said Gertjan van der Geer, who manages to announce 1 soccer match between her an agriculture fund for Swiss bank Pictet. “Cargill team Olympique Marseille and the changes and Louis Dreyfus are the large missing players in Paris St Germain last November. at the club. It’s REUTERS/gonzalo fuentes 11 TRADING HOUSES october 2011 a key supplier to one of the fastest growing can see that in the way they trade.” his billionaire uncle Robert Kuok to set up an economies in the world. It doesn’t always work. In May, Argentina edible oil business with a big bet: China. The company, which went public 10 years kicked Bunge off the country’s exporters’ register He competed fiercely with Indonesia’s Salim ago, realized early that rising incomes in after the government alleged it had evaded $300 group, the business group commanded by Asia could be fed by Brazil and Argentina, million in taxes, an accusation the company his uncle, and won, to dominate the edible oil two of the last remaining countries with new denies. Argentina’s tax office is investigating market in the world’s most populous nation. farmland left for crop cultivation. dozens of other agricultural exporters as well. Wilmar is now the biggest soy player It helps that the company’s CEO Alberto Despite not being on the registry, Bunge in China with a 20 percent market share, Weisser is a Brazilian, and that Bunge has more continues to export grains and agricultural measured in processing capacity. It is also the than 100 years experience in South America. products as usual, but it cannot cash in on certain largest producer of consumer pack edible oils “Asian demand for South American tax benefits and it faces hurdles transporting with about 45 percent market share. soybeans has exploded over the last five years goods within Argentina, which analysts say Wilmar’s strategy is to have its fingers in and Bunge is arguably the best positioned could hurt the company’s bottom line. every part of the supply chain, from point of company in the world as it relates to servicing (Hugh Bronstein) origin to destination. and profiting from the Asian demand trend,” In the palm oil business, for example, it said Jeff Farmer, an analyst who follows the owns plantations, mills, refiners, shippers, company for Jefferies & Company in Boston. ASIA’S NEW SUGAR KING bottlers and the distribution network, in both Founded in 1818 in Amsterdam, the company WHO: Wilmar International, founded 1991 the top producers, Indonesia and , is the world’s No.1 oilseed processor. Along the WHERE: Singapore and the top consumers, India and China. way it has moved headquarters to Belgium, WHAT: Palm oil, grains, sugar That gives its traders the advantage of Argentina, Brazil and then the United States. TURNOVER: $30.4 billion (2010) timely market intelligence. “They go where the business is,” said an CHAIRMAN AND CEO: Kuok Khoon Hong “We have a daily sales report from every industry insider who asked not to be named. STAFF: 88,000 plus corner where we operate and if we see sales “No sentimental attachments to any country AROUND TWO DECADES ago, Kuok Khoon slowing over a few weeks, we get to know the or location. What matters is results, and you Hong decided to leave the business empire of changing trend before others,” one employee

CANE: Tim Toeun carries sticks of sugarcane to load onto an ox-cart at a farm in Kandal province, Cambodia, in May. The country’s sugar industry is on the comeback thanks to foreign investment. REUTERS/samramg pring

12 TRADING HOUSES october 2011 said, on condition of anonymity. In 2006 Kuok, now 62, orchestrated a $4.3 billion merger which consolidated his uncle’s palm oil assets into Wilmar, making it the world’s largest listed palm oil firm. Last year he surprised the market when he trumped China’s Bright Food in a $1.5 billion deal to buy Australia’s Sucrogen. That complements his plan to set up a 200,000 hectares plantation in Indonesia’s Papua island, which could make him the new “Asian sugar king”, a title once hold by his uncle. With nearly $10 billion worth of cash and bank deposits on Wilmar’s balance sheet, Kuok is unlikely to stop his expansion drive there. Investors say he might already have his sights set on Brazil, to strengthen his position in the global sugar market. (Harry Suhartono, Naveen Thakral)

THE CUSHING CUSHION WHO: Arcadia, founded 1988 by Japan’s Mitsui & Co BASED: London TRADES: Oil SWAP: John Frederiksen, owner of Arcadia, in July 2005. He was Norway’s richest man until 2006, when he TURNOVER: $29 billion, Reuters estimate became a national of Cyprus, where tax rates are lower. REUTERS/REUTERS/Hakon Mosvold Larsen/ OWNER: John Fredriksen Scanpix/Files STAFF: 100 Risk has often paid off handsomely for oil by cornering part of the North Sea physical Fredriksen. With a personal fortune estimated crude market. The suit was settled out of court ARCADIA PETROLEUM, the London-based by Forbes at $10.7 billion, the 67-year-old was for an undisclosed sum. oil trading firm owned by billionaire oil tanker Norway’s richest man until he abandoned his Arcadia often trades large volumes of oil magnate John Fredriksen, was thrust into citizenship in 2006 to become a national of from Nigeria and Yemen, where it boasts close the spotlight in May when U.S. commodities Cyprus, where tax rates are lower. relationships with state oil firms. In a 2009 regulators sued it for allegedly manipulating Beyond Arcadia, Fredriksen’s stable State Department cable from Yemen, obtained U.S. oil markets in 2008. of commodities-related firms includesby WikiLeaks and provided by a third party to In one of its biggest-ever crackdowns, MarineHarvest, a global salmon-farming Reuters, sources told U.S. diplomats that the the U.S. Commodity Futures Trading conglomerate billed as “the world’s largest company used intimidation tactics including Commission alleges Arcadia traders amassed seafood company.” He also owns oil tanker kidnapping threats to buy Yemeni crude at large physical crude positions in Cushing, operator Frontline, U.S. oil trader Parnon below market prices. Arcadia’s chief executive Oklahoma, to create the appearance of tight -- also named in the CFTC lawsuit -- energy in Singapore, Stephen Gibbons, denied the supply at the delivery hub for U.S. oil futures. driller Seadrill and gas distributor Golar LNG. contents of the cable and told Reuters the Fredriksen’s traders then hurriedly sold the Fredriksen became a leading oil shipping kidnapping allegations were “ludicrous”. physical crude at a loss, the CFTC lawsuit magnate well before buying Arcadia, in 2006. (Caroline Copley and Joshua Schneyer) claims, ending expectations for tight supplies. His 28-year-old twins Kathrine and Cecilie Overall Arcadia profited by $50 million in play a growing role in his sprawling business derivatives markets as oil futures spreads empire, according to press reports. collapsed, according to the suit. Arcadia doesn’t make its revenues public. 60 YEARS OUT OF THE In a May interview with Reuters, Fredriksen With 800,000 barrels a day to market, LIMELIGHT refuted the charges and shot back that a volume similar to OPEC country Qatar, WHO: Mabanaft “maybe they (U.S. regulators) are trying to Arcadia’s annual gross revenue from oil could WHERE: Rotterdam get some revenge” for the 2010 BP oil spill be around $29 billion based on current prices. WHAT: Oil in the Gulf of Mexico. Several of Fredriksen’s The company lists its trade in paper TURNOVER: $15 billion, Reuters estimate traders worked for BP in the early 2000s, derivatives as larger still, or about 10 million CEO: Jan-Willem van der Velden where aggressive oil trading at Cushing barrels a day. STAFF: 1,772 turned huge profits, and also led to BP paying Arcadia has faced controversy before. fines for alleged trading violations. Founded in 1988 by Japanese trading giant MABANAFT’S PROFILE IS low even by the “It is a normal situation for oil traders ... Mitsui Inc., it was sued in 2000 by independent secretive standards of other independent oil They are buying and selling oil. That’s what US refiner Tosco for allegedly conspiring to traders. The company has spent six decades it is all about,” Fredriksen said of the recent jack up prices of European benchmark Brent trying to keep it that way. Its website reveals CFTC charges. 13 TRADING HOUSES october 2011

little more than that it is the trading arm of GOING IT ALONE: R Jayachandran, privately owned oil company Marquard & Bahls. Chairman of Singapore’s Olam A rare news release announced that Jan- International, in Kuala Lumpur, September 14. REUTERS/bazuji Willem van der Velden, who started as an muhammad international trader at the company in 1997, would take over as CEO from January this year. Olam into a $4.5 billion company Van der Velden took the reins of a company involved in around 20 different on a roll. Mabanaft sold 20 million tonnes commodities including coffee, of oil in 2010, up from 18 million tonnes in cocoa, rice, grains and sugar, 2009. Pre-tax income for its parent company from a startup that sold Nigerian Marquard & Bahls was $274 million, up from cashew nuts. $252 million the previous year. These days, Olam has upstream That’s still a lot less than the billions the operations in everything from biggest independent oil traders make and a coffee plantation in Laos to a long way off the revenue of Marquard & a rice business in Thailand, Bahls’ oil tanking division, the second largest from almonds in Australia to in the world after Vopak. Which may be cashews in Africa. The firm is why Mabanaft wants to expand beyond its now the world’s largest shipper northern European heartland. of Robusta coffee and counts From the 43rd floor of a Rotterdam Nestle, Hershey, General Mills skyscraper, staff members can look out over and Sara Lee as clients. It is also a network of rivers towards some of Europe’s the world’s second largest trader biggest refineries. But Mabanaft has also of rice after Louis Dreyfus. gradually opened offices in Singapore and the The French trading giant United States and, in the summer of 2010, a approached Olam with a merger representative office in India. proposal in 2010, but talks failed As usual, details are scant. “Mabanaft is earlier this year. aiming to further diversify its product portfolio Verghese, who Forbes says is by pursuing a controlled geographic growth worth $190 million, believes he can strategy,” is all communications manager go it alone and aims to quadruple Maren Mertens is able to offer on the subject. the company’s value by 2015. It helps that Olam has backing in Geography isn’t the sole focus of expansion -- it He’s well on the way. A fleet of tankers and high places: Singapore state investor Temasek has moved into naphtha, LPG and wood pellets. Asia’s largest commercial storage facility are holds a 14 percent stake in the trading firm. (Jessica Donati) among the company’s assets. Some analysts point to risk factors: Olam’s The $5-billion refinery would pit Hin exposure to natural disasters, such as recent Leong against refineries already operated in flooding in Australia, and social or political FROM CASHEWS TO FORBES Singapore by oil majors Shell, ExxonMobil unrest such as that in Ivory Coast. WHO: Olam, founded 1989 by the Kewalram and a joint venture between Chevron and (Harry Suhartono) Chanrai Group, began trading cashews from China’s PetroChina.

Nigeria Hin Leong made its name in the hard- WHERE: Singapore fought Asia fuel oil and distillates market WHAT: Coffee, cocoa, rice, grains, sugar IN SEARCH OF A REFINERY over 20 years ago, and is arguably the TURNOVER: $11 billion (2009/10) WHO: Hin Leong, founded 1963 supplying largest independent distillates trader in CEO: Sunny Verghese diesel to fishing boats Asia, regularly mounting successful trading STAFF: 13,000 plus WHERE: Singapore plays in the Singapore market. It also has a WHAT: Oil and tankers substantial presence in Asia’s fuel oil market, A WEALTHIER WORLD NEEDS more food. TURNOVER: $8 billion (2010) the world’s largest. That’s the argument of Sunny Verghese, chief CHAIRMAN AND CEO: Lim Oon Kuin Lim’s Chinese connections have played a executive of Singapore-based trading firm STAFF: About 100 big part in the company’s success. It focused Olam International. initially on shipping fuel oil cargoes to the “We haven’t seen this pace of population LIM OON KUIN ARRIVED in Singapore from mainland, a relationship that has since growth in our living memory,” Verghese told China over 50 years ago, and started to deepened. Hin Leong is joining hands with a conference in Singapore late last year. “We deliver diesel by bicycle to boatmen. Now several Chinese firms to build the proposed have to increase food production by 50 percent in his mid-60s, the reclusive trader is busy Singapore refinery, even as it seeks to build a by 2030, and 80 percent by 2050, with our with his latest empire-building effort: getting larger oil storage facility in the South Chinese hands tied behind our back,” he said, referring government approval to build the city-state’s province of Fujian. to constraints to boosting output such as the fourth oil refinery. Lim’s biggest bet may have been an lack of land, water and infrastructure. Known as OK Lim, the founder of Singapore’s unprecedented 1997 spree in which Hin Verghese still plans to cash in. In two Hin Leong Group wants to build the company Leong bought 30 million barrels of jet fuel decades the Bangalore-born trader has built from oil trader into an integrated company. and diesel in the key Singapore market --

14 TRADING HOUSES october 2011

HARVEST: Combines harvest wheat on the Stephen and Brian Vandervalk farm near Fort MacLeod, Alberta, September 2011. REUTERS/Todd Korol worth nearly US$800 million over a three- to accept it,” he said. (Yaw Yan Chong.) CORRECTION: In the PAST SCRUTINY month span. The jury is still out among rival section of the introductory story, corrects to traders on whether he made or lost a fortune (Jessica Donati, Christopher Johnson Ikuko reflect that Trafigura paid a U.S. Customs fine that summer, a debate Lim is unlikely to Kurahone, Barbara Lewis, Richard Mably and on an Iraqi crude cargo in 2001, but denied settle publicly. Dmitry Zhdannikov reported from London, wrongdoing; clarifies language on Trafigura’s In his only media interview, with Reuters in Gus Trompiz from Paris, Caroline Copley from 2009 legal action to prevent a report on toxic 2006, Lim credited his success to investment Zurich, Emma Farge from Benghazi, Karl Plume waste dumping in Ivory Coast from being in his tanker armada -- the “secret weapon” and Christine Stebbins from Chicago, Hugh published. that helped him set up stealthy and profitable Bronstein from Buenos Aires, Joshua Schneyer deals in the 1990s -- and his philosophy of from New York, Luke Pachymuthu, Harry perseverance. Suhartono and Naveen Thukral from Singapore; “Sometimes you get it wrong, but you have Editing by Richard Mably, Simon Robinson and Sara Ledwith)

COVER PHOTO: (Clockwise from top left:) Ingots of tin at a smelter on the Indonesian island of Bangka; tea picking at a plantation in Sichuan Province; a tipper truck at a Rio Tinto iron ore mine in Australia; miners working inside a coal mine in central Bosnia; a taxi is filled with fuel in Taipei; a wheat crop ready for harvest on the Canadian prairies; a worker displays nickel ore in a ferronickel smelter in Indonesia’s southeast Sulawesi province; gold bars at the Korea Gold Exchange. REUTERS/ BEAWIHARTA, KEVIN ZHAO, TIM WIMBORNE, DAMIR SAGOLJ, NICKY LOH, TODD KOROL, YUSUF AHMAD, ROMEO RANOCO, JO YONG-HAK

For more information contact:

SIMON ROBINSON, RICHARD MABLY, JOSHUA SCHNEYER Enterprise Editor, EUROPE, MIDDLE EAST GLOBAL COMMODITIES Editor [email protected] AND AFRICA [email protected] [email protected]

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