Commodity trading

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In the economy , raw materials trading are those branches of the economy that deal with the trading and distribution of primary and secondary raw materials .

General

The raw material trade is an essential part of the raw material economy , but is not concerned with the extraction and processing of the raw materials itself. This takes place on upstream processing stages . Within a country, raw materials trade takes place via trade ( trading levels such as wholesale and retail ), which acts as a sales intermediary between supplier and customer on the raw material market . In the context of foreign trade , raw materials trade takes place via export and import . The importance of raw materials in world trade has steadily decreased due to the advance of products of higher quality processing stages, because in the 1970s the market share in world trade was 46% and in 1994 it was only 27%. Nevertheless, for many resource-rich developing and emerging countries, trading in raw materials through exports is an important source of income, and in some countries it is even the main source of income in the form of a monostructure .

Commercial objects

Green coffee is a real agricultural raw material

The following are possible trading objects on the raw materials market:

These commercial objects are classified according to their primary use.

history

The "King of Prussia" - the first trading ship of the Royal Prussian-Asian Company of Emden

An early futures trading of olives took place in ancient Greece and of wheat in ancient Rome . In the 6th century BC , Thales von Milet is said to have made forward transactions in the form of options on olive presses. Organized trade in raw materials on the Silk Road began with the Han dynasty at the latest around 206 BC. BC, the main trading objects were silk , agricultural products and luxury goods ( agate , amber , ebony , ivory or sandalwood ). At that time the commodity trade did not reach any significant proportions; it was not until the Age of Discovery that there was extensive trade.

After the Portuguese Fernão Peres de Andrade reached the coast of Canton on the offshore island of Nei Lingding Dao in August 1517 , agricultural commodities dominated trade. This brought tea and spices to Europe. The tulip mania in the Netherlands was arguably the first speculative bubble to peak in February 1637. In barter for silk and tea Europeans delivered in 1750 metals such as lead, iron and tin to China. In July 1753 the first trading ship of the German Emden East Asian trading company , the " King of Prussia ", returned from Canton to Emden with raw materials. The proceeds from the goods on the first trip, such as tea, raw silk and china, made hardly any profit, but covered the cost of the trip.

International commodity agreements have been concluded to regulate the world trade in raw materials, for example for tin (1956), wheat (1962), olive oil (1963), coffee (1968), sugar (1969), cocoa (1973) and the International Tropical Timber Agreement (1983) .

Trading venues

In the 19th century, the USA began to trade standardized agricultural products ( commodities ) on commodity exchanges . The Chicago Board of Trade started there in April 1848 with a cash market for grain . In 1858, we standardized futures contracts - still different back then were called ( English "to-arrive contracts" ) - in particular, the product quality of grain sure. The Chicago Board of Trade (CBOT), founded in 1848, is the world's oldest futures exchange and part of the CME Group . More than fifty different commodity futures are processed by over 3,600 CBOT members, both through floor trading and electronically . Another exchange is the Chicago Mercantile Exchange (CME). Above all, futures and options on various goods are traded on the CME . In October 1865 there were formal trade rules, particularly on the delivery obligations of the seller. The New York Cotton Exchange began in September 1870, followed in May 1872 by the Butter and Cheese Exchange of New York , the predecessor of what is now the world's largest commodity futures exchange, the New York Mercantile Exchange (NYMEX); the Coffee, Sugar and Cocoa Exchange was established in March 1882. The first metal exchange opened in January 1877, the London Metal Exchange, which still exists today . She is responsible for industrial metals such as aluminum , lead , copper , nickel , zinc and tin . With the exception of copper and aluminum, which are also traded on NYMEX in New York , the LME has almost a monopoly on all other metals. The ICE Futures (formerly "International Petroleum Exchange," IPE) is trading platform for Europe's leading oil grade Brent . It is the largest futures exchange for options and futures on oil , natural gas and electricity in Europe.

The London Bullion Market is the most important off-exchange trading center ( English over-the-counter, OTC ) for gold and silver, as well as one of the world's major commodity trading places in London. The world market price for gold has been determined here since 1919 and the world market price for silver since 1897 . Trading is coordinated by the London Bullion Market Association (LBMA). The pricing for the precious metals platinum and palladium takes place at the London Platinum and Palladium Market (LPPM). Like the London Bullion Market, the LPPM is the exception among the commodity markets: it is not an exchange, but an OTC market.

Commodity indices

The Thomson Reuters / Jefferies CRB Index measures the price development of 19 commodities relevant for world trade . It was first calculated in 1958 by the Commodity Research Bureau (CRB) in the USA. The index is considered to be a superordinate indicator for the entire raw materials sector. Today's commodities index , which is called the CRB Index , cannot be compared with the historical CRB Index. It was fundamentally revised in 2005 when its traditional calculation method was no longer up to date. The original CRB index has since continued under the name Continuous Commodity Index ("Old CRB Index").

Other commodity indices are the Bloomberg Commodity Index (formerly Dow Jones-AIG Commodity Index), the Rogers International Commodity Index (RICI) and the S&P GSCI (formerly Goldman Sachs Commodity Index). A food - price index of the Food and Agriculture Organization (FAO) of the United Nations , the FAO Food Price Index (FFPI). It records the development of world market prices for various agricultural raw materials and foods. The HWWI raw material price index is a comprehensive raw material index.

In contrast to commodity indices, commodity stock indices do not reflect the performance of the commodities, but that of the stock corporations . Examples are the NYSE Arca Gold BUGS Index (HUI), a stock index of the international gold producer and mainly Gold promoting mining company, and the Philadelphia Gold and Silver Index (XAU), are listed in the international gold and silver producers.

Commodities as an asset class

As commodities, raw materials represent their own asset class and are considered alternative investments . Due to its high volatility , this asset class is often the subject of speculative investments, so that it is only suitable for risk-averse investors . The counterparties are usually not interested in the physical delivery of the raw materials, but rather in price gains . The investment is therefore not made in stocks, but in forward transactions on or short sales of raw materials or exchange-traded exchange-traded commodities (ETCs). By far the most popular investment objects are precious metals in the form of gold ( gold bars or gold coins ). Gold is often viewed as a hedge against inflation and crisis situations, although a return cannot be achieved.

economic aspects

For many raw materials, security of supply and energy security play a major role, so that the degree of self-sufficiency in a country is measured sensitively. The closer the degree of self-sufficiency approaches 100%, the higher the self-sufficiency and the lower the dependency on imports.

There are delivery bottlenecks due to sudden excess demand ( e.g. hamster purchases ), in the event of overproduction there is an excess supply . Other market imbalances are the demand gap and the supply gap . In the absence of minimum and maximum prices , all four market imbalances affect commodity prices . They can never drop to “zero”, because raw materials are material assets with an intrinsic value , a utility and scarce goods . In contrast, unlimited exorbitant price increases are possible (such as oil price crises ) that can be caused by market disruptions . A distinction must be made between real and nominal shocks . Real shocks are brought about by changes in resources or technology , for example, and result in shifts in supply or demand . Nominal shocks emanate from the financial markets . Commodity- related shocks can be differentiated into shock intensity and shock persistence , with the intensity describing the extent of the commodity price change and the persistence describing the durability of the price change. A rise in raw material prices makes production more expensive and can therefore be interpreted as a negative supply shock; the reverse is true with a fall in prices. The supply curve shifts to the left.

Literature / web links

Individual evidence

  1. ^ Ulrich Becker, Lexicon futures trading: Finanz und Rohstoff-Futures , 1994, p. 537
  2. ↑ Ulrich Becker, Lexicon futures trading: Finanz und Rohstoff-Futures , 1994, p. 537 f.
  3. ↑ Torsten Dennin, Lucrative Raw Material Markets - A Look Behind the Scenes , 2010, p. 14
  4. ↑ Manuel Sternheimer, raw materials as a strategic asset class , 2007, p. 17
  5. ↑ Cheng Shi, Legal Framework for the Development of Trade Relations between China and the EU in the Extractive Sector , 2016, p. 30
  6. ↑ Tomé Pires / Francisco Rodrigues, The Suma oriental of Tome Pires , Volume 1, 2005, p. XXX
  7. ↑ Cheng Shi, Legal Framework for the Development of Trade Relations between China and the EU in the Extractive Sector , 2016, p. 32
  8. ↑ Dr. Th. Gabler Verlag (Ed.), Gablers Wirtschafts-Lexikon , 1984, Volume 5, Sp. 1060 f.
  9. ↑ Ted P. Schmidt, The Political Economy of Food and Finance , 2015, o. P.
  10. ↑ Roland Eller / Markus Heinrich / René Perrot / Markus Reif (eds.), Management von Rohstoffrisiken , 2010, p. 91
  11. ↑ Roland Eller / Markus Heinrich / René Perrot / Markus Reif (eds.), Management von Rohstoffrisiken , 2010, p. 92