A commodity trader is one of the essential actors on the long process of getting commodities from the producer to the consumer. The typical trader based in Geneva buys a commodity from a producer and sells it to an importer or final user, moving the commodity from one location to another. The trader’s expertise is in transport, logistics, financial instruments and risk management. The more the trader manages the logistics in purchasing further upstream and selling further downstream, the more he can obtain a competitive advantage. Geneva’s trading companies tend to specialise in certain commodities, for example, in oil and/or gas, steel or in such “soft” commodities such as grains, vegetable oils and oilseeds, rice, coffee, sugar, ethanol, cotton or paper pulp and paper. Besides the physical trading activity, one should add the required expertise of the “paper trading” used for hedging purposes. For oil trading, the paper trading is estimated to be 10 to 15 times the size of the physical market.
Grains, Oil seeds, Rice
Geneva is the world’s Number One hub for the trade of grains and oil seeds, handling alone one-third or approximately 75 million tons of the global free trade in these commodities and three-fourths of trade in Europe (including the CIS countries).
Crude Oil – Oil Products
Of the close to 96 million barrels per day of crude oil consumed daily, we estimate that about 40 million barrels are traded internationally. To this volume, which corresponds to about 1.9 billion tons annually, one should add about 1 billion tonnes of refined products (corresponding to the quantity transported by sea). Geneva ties with London as Europe’s Number One oil trading hub with roughly one-third or about 700 million tons per year of the world’s free oil trade in terms of physical trade. We also believe that about 75% of Russian exports of crude oil and oil products are managed through Geneva.
In the worldwide physical trading of sugar, the Geneva region also shares first place in Europe with London: each hub manages one-third of the global sugar trade, i.e., 15 million tons each.
For the worldwide trade of cotton, excluding US domestic trade, Lake Geneva Region traders represent 22% of volume, i.e., 1.2million tons out of 5.5million tons traded globally, and rank first in Europe.
Historically, coffee houses and independent coffee traders based themselves on the Swiss German side, in particular in Zug. From the 135 million 60-kilo sacks produced worldwide, 90 million bags traded internationally, of which at least half pass through Swiss-based companies, either industrial buyers or traders. For a number of years, traders have been moving to the Lake Geneva Region. Several STSA Members, of which Sucafina and Louis-Dreyfus, are active in the trading of coffee.
Four major players on the ethanol market (industrial, edible, bio-fuels) are based in Geneva or surroundings.
A number of less tangible commodity-trading activities should be mentioned as they involve large volumes and large amounts, although we do not dispose of figures to quantify this trade. All of them are traded in Geneva. First, electricity. Several major trading companies based in Geneva, such as Cargill, RWE, Koch, Sempra, are trading electricity. Second, CO2. In the wake of the implementation of the Kyoto protocol, CO2 certificates have become a commodity which is traded on a large scale in the European Union In this way, the polluter pays by buying certificates and industrial companies having invested in reducing CO2 emissions recover. Several of our Members are trading CO2 certificates.
Finally, besides commodity derivatives, freight also has its derivative market (FFAs) which are actively traded in Geneva.