Shifting Strategies: Exploring the Hidden World of Metals Trading

The metals industry has historically been extremely opaque, deliberately so. While some of the largest traders have opened up their books through IPOs, financial reports, and white papers, metals trading remains shrouded in mystery. In this article, Samuel Basi, Founder and Author of Perfectly Hedged, and former Trafigura metals trader, sheds light on the world of metals trading as it becomes a strategic battleground for the world’s largest commodities traders.

Shifting Strategies

Recently, three of the world’s most profitable oil traders—Gunvor, Vitol, and Mercuria—have launched metal trading desks after consecutive years of record-breaking oil profits. With oil market volatility potentially easing, diversification has become essential to maintain the profit levels their shareholders expect. Metals present a natural next step for companies with global infrastructure, market knowledge, and, crucially, the bank lines to finance trading operations.

The timing of these moves is no coincidence. With the energy transition driving a dramatic rise in metal demand, the sector holds enormous growth potential. Take copper, a critical metal in clean energy. According to several major reports, the world could see annual copper deficits of nearly 10 million metric tons by 2035 if no major new mines come online. The International Energy Agency predicts that copper demand from clean energy technologies alone could double by 2040. And it’s not just copper—metals like aluminum, cobalt, lithium, nickel, zinc, and rare earth minerals will face similar supply pressures. If you need proof of just how critical metal supply has become, look no further than the U.S. request for Ukraine to share its mineral deposits as part of wartime negotiations with Russia. Access to key resources is now a strategic priority, shaping geopolitical decisions at the highest levels.

At the same time, another force is reshaping global metal supply chains—protectionism. The COVID-19 pandemic exposed the risks of over-reliance on foreign suppliers, forcing governments to rethink sourcing strategies. As traditional alliances shift, nations are securing direct deals with major metal producers and traders to lock in long-term supply. Tariffs and trade restrictions are further disrupting established routes, creating market imbalances. For traders, these supply shocks present opportunities to leverage global networks, navigate shifting flows, and capitalise on volatility.

The opportunities in metals trading are clear.

Metals trading: The basics

Metals trading itself can be split into a few main categories:

• Concentrates Trading: Buying directly from miners and selling to smelters/refiners that produce finished metals.
• Refined Metals Trading: Supplying metals from refiners to manufacturers producing value-added goods.
• Scrap Metals Trading: Scrap metal is essential to the global metals supply chain. Scrap traders acquire it for resale to recyclers or smelters for reprocessing.

Expertise matters

Regardless of the type of metal companies choose to trade, they are all attempting to make a profit by acting as intermediaries between producers and consumers. Traders rely on their long-term relationships, financing capabilities, derivatives knowledge, and logistics expertise to sustain profits in these markets, offering a valuable service to both producers and consumers.

But, as globalisation has connected producers directly to consumers, trading margins have compressed. In response, the largest traders have scaled up, increasing volumes, securing multi-year supply deals with consumers, and financing-backed off-takes with producers. Meanwhile, small to medium-sized traders have found success in niche markets that larger firms often deem too small or risky.

Even for firms with established trading desks and decades of experience, success in metals trading is never guaranteed—things frequently go wrong. Despite stringent ‘Know Your Counterparty’ (KYC) procedures, which are meant to verify the identity and financial stability of the parties involved in a transaction, counterparties have reneged on contracts, leaving traders with significant financial exposure. Fraud remains a persistent threat, with several high-profile cases involving falsified documentation leading to losses in the hundreds of millions, if not billions, of dollars.

With all these complexities, truly understanding the inner workings of metals trading is nearly impossible—unless you’re on a trading desk. Even then, learning from experience alone can be slow and difficult. Perfectly Hedged LLC was founded to remove these barriers to information, providing existing employees and aspiring traders with the key insights needed to navigate the industry. Our courses ensure that participants not only grasp the fundamental concepts of trading and risk management but can also apply them immediately to make a tangible impact in their company, no matter their role.

In an industry where knowledge gaps can make or break careers, having access to the right insights is crucial—particularly given the sink-or-swim nature of jobs within metals trading companies.

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