By Kevin Morrison
The hottest commodity in the booming commodities markets would seem to be the traders themselves.
So great is the scramble to strengthen once-neglected commodity trading desks and so scarce is the top talent that experienced traders are now commanding seven-figure sign-on fees and bonuses to match.
Industry executives said senior energy traders were receiving sign-on fees of more than $2m (€1.5m) in some cases. Two years ago sign-on fees were unheard of in the energy market. Commodity traders were largely unwanted during the 1990s and in the immediate aftermath of the Enron collapse and banks trained few new staff in their commodity trading divisions.
Now, the surge in energy and metals markets, which has seen gold and silver touch fresh 25-year highs and copper reach an all-time high of $8,825 a tonne, has forced banks to expand their commodity desks.
This week Citigroup said it planned to almost double its global commodities trading staff, while Credit Suisse, Lehman Brothers and Bear Stearns are among the latest banks to strengthen their trading teams.
Barclays Capital, JPMorgan, Deutsche Bank, Merrill Lynch, UBS, ABN Amro and BNP Paribas have all been expanding their commodity trading businesses.
Some of the recent large signings include Henrik Wareborn, who joined Lehman Brothers from Hess Energy Trading, and Xiao Qin, an oil options trader, who left Goldman Sachs for UBS.
“They [oil traders] have become some of the best paid people at the banks today,” said one recruitment executive.
The salary inflation is also pushing up staff costs for oil companies, utilities and trading companies such as Glencore and Cargill, which all have big energy trading businesses.
Barclays Capital, JP Morgan, Deutsche Bank, Merrill Lynch, UBS, ABN Amro and BNP Paribas have all boosted their commodity trading businesses in recent months.
But it is not just the top traders reaping the benefits. Even less experienced traders are commanding six-figure sign-on fees and guaranteed bonuses for up to three years, according to industry executives. Some are concerned that certain traders lack the necessary experience and fear their appointment to key positions could increase the risk of trades going wrong. “There is more potential for a blow-up if you have someone that does not have experience to deal properly with the risk a bank is taking on,” said one analyst.
Ben Pink, chief executive of DNA Search, a commodities recruitment agency, urged banks to look beyond the financial sector for the experience they need.
Source: Financial Times