Physical supply chain is the core of commodity trade economy. Global trading companies help customers around the world acquire, store, mix and transport bulk commodities through transportation and complex logistics.
Through the trade volume of Trafigura (the third largest independent oil trading company in the world and the second largest independent nonferrous metal concentrate trading company in the world), we can get a glimpse of the scale of this business. In the year of 20 15, Trafigura traded 654.38+46 million tons of crude oil, gasoline, fuel oil, middle distillate oil (jet fuel and diesel oil), naphtha, liquefied petroleum gas, liquefied natural gas and biodiesel.
In the same year, the trade volume of metal concentrates, refined metals, coal and iron ore totaled 52 million tons. In transportation, 2,744 independent voyages transported 95 million tons of petroleum and petroleum products and 32 million tons of minerals and metals.
As a leading independent trader, Trafigura participates in every node of the supply chain, from production, storage and mixing to transportation and final delivery. Its purpose is to provide customers with a whole set of services.
Markets are closely linked.
Global supply chain contains a large number of interrelated supply chains.
There is no homogeneous global crude oil market. On the contrary, there are interrelated regional markets, and products of different types and grades are priced according to regional benchmarks.
More than 150 kinds of crude oil are traded all over the world. Their pricing is based on three main benchmarks: West Texas Light Crude (WTI), Brent Blend Crude and Dubai Crude. However, the range of pricing differences between these markets is limited.
If the spread widens, traders will mix and transport crude oil priced in the cheap market and sell it in the high-priced market, which will become profitable. When traders do this, the pressure of supply and demand will cause the spread to decrease again.
Primary and secondary products
The supply chain connection between primary and secondary commodity markets is the most direct.
Primary commodities such as crude oil and copper concentrate are obtained from oil wells and mines. They are ready for transportation at the production site. Heavy crude oil can be mixed with distillate oil or light crude oil to reduce viscosity and increase pipeline flow. Copper ore is crushed and ground into refined copper ore.
The end users of primary commodities use them as raw materials and process them into secondary commodities that can be sold to manufacturers, utility companies and energy users.
Refineries and smelters play the roles of commodity producers and consumers at the same time. Refineries obtain crude oil and produce gasoline, distillate oil, fuel oil, etc. Copper concentrate is obtained by copper smelter and put into smelting furnace to produce refined copper metal. Need accurate and specific goods.
Traders establish channels between producers and consumers in primary and secondary commodity markets. They changed the goods they transported to meet the consumers' demands for time, delivery and quality.
The connection between markets
The basic principle of economic operation connects the market and affects key trade channels.
For example, the shale revolution in exporting countries has had a great impact on the global energy trade pattern. It reduces America's net oil imports and increases America's refined oil exports, forcing traditional American suppliers such as Nigeria to find alternative markets.
Not only makes the United States self-sufficient in natural gas, but also becomes an exporter of liquefied natural gas; Moreover, shale gas in the United States has pushed American coal out of the domestic energy market, which has had a far-reaching negative impact on the world coal market. These multidimensional consequences reflect the inseparable connection between markets.
Storage promotes market stability
The inflexibility of commodity supply and demand intensifies the potential fluctuation of the market. Closing a mine is expensive.
Once the mine is closed, it is difficult to start again. So miners are willing to continue production even if they lose money. In the medium term, this may mean that the reduction in demand will lead to a continuous oversupply. Without any fuse mechanism, the price will fall faster.
Storage plays a key role in the global supply chain. It acts like a shock absorber, reducing the overall price fluctuation. When supply exceeds demand, inventory will rise. When demand exceeds supply, inventory can be released to meet consumer demand.
Trading companies manage global warehousing and inventory to maintain market balance. They use the futures market to hedge the fluctuation of commodity prices. Usually they accumulate inventory in the buyer's market and reduce inventory in the seller's market. By doing so, traders can profit from market fluctuations and reduce fluctuations by alleviating the imbalance between supply and demand.
Fluctuations in the economic situation have increased opportunities for creating value. The influence of supply and demand will cause regional imbalance, and then create space arbitrage opportunities for traders. The greater the fluctuation, the more valuable the inventory is, resulting in intertemporal arbitrage opportunities. The more severe the economic shock, the more severe the relative price will be, especially the temporary price mismatch that creates trading opportunities.
Traders and volatility
A market with deep and continuous liquidity can play a more effective role. Traders help to establish a liquid commodity market, thus reducing transaction costs. They are especially active in the turbulent market.
Traders grow up in turmoil, while commodity markets usually fluctuate greatly. But also, traders can benefit from the bottleneck of logistics supply chain, but it will not cause the above bottleneck, so it cannot be considered that traders have stimulated market turmoil.
Take the world oil market as an example. Oil is the staple food of economic life. In the short and medium term, price fluctuation has little effect on consumption, because all our cars need gasoline. So small price changes will also lead to huge price changes.
It also involves geopolitics, similar to oil-producing countries being sanctioned or torn apart by internal conflicts. Seasonality, government fiscal policy and the control of strategic oil reserves between China and the United States will have a major impact.
Commodity traders will not cause these general situations; They will not encourage unrest. Traders are not speculators-their job is to match sellers and buyers. They made a match by arbitrage. Arbitrage actually helps to rebalance the market and improve the effectiveness and transparency of the physical market, rather than aggravating market volatility.
Extended thinking
An efficient supply chain can ensure the smooth transmission of energy and raw materials that form the basis of our civilization, thus promoting social prosperity. The market-led mechanism is extremely effective in matching supply and demand.
After decades of development, China has formed a special commodity supply chain structure. However, with the change of global commodity supply chain pattern and the guidance of new economy and new infrastructure, China's commodity supply chain will undergo earth-shaking changes. Digitalization and intelligence will become the main direction and driving force of industry development.