spRING 2011 GlobAl MARKETs INTERNATIoNAl - Willis

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marIne CoMModity tRadiNg Perhaps more than usual in an average year, we have seen a number of factors, including good old fashioned harvesting results, combining to create a volatile market place. This contradicts the underlying fundamentals of speculative interest, seasonal impact, environmental upheaval and political motivation. As a result of the global economic downturn, we saw the prices for many commodities fall dramatically. The relatively modest exposure in Asia has certainly been a factor for the revival for certain commodities. Even with China trying to avert an overheated economy, its impact on the world’s raw material’s markets remain undeniably strong. Climate continues to have a far-reaching impact, causing sudden price hikes and unforeseeable volatility as the recent Russian wheat export bans and the impact on cotton prices following the flood in Pakistan amply demonstrate. Aside from the niche companies, many smaller-sized firms have ceased trading during the financial crisis. This has left the larger trading companies to buy up competitors, and diversify into the ownership of fixed assets such as refineries and mines. This provides them with a consistent supply of product without having to trade through the usual markets. The banks have an increasing influence, many of whom are now entering the commodity fields by providing cash for goods using the monetisation model. Companies seeking to gain the competitive edge are looking to more sophisticated financing options. Further interest is from hedge funds seeking to move away from higher risk financial instruments to counteract the impact of reduced margins. In insurance terms, we have seen a shift away from temporary FPSO storages towards more regular trading volumes. In spite of the relatively depressed price levels compared to the peaks registered in 2008, this class of insurance still attracts insurers’ attention: high insured limits are maintained but the perceived good loss experience in this class has resulted in a highly competitive market for this commodity. 38 | Willis | Mining Market Review 2011 " ComPanIes seekIng to gaIn tHe ComPetItIVe edge are lookIng to more soPHIstICated fInanCIng oPtIons" Metals (haRd CoMModities) The economic recovery has resulted in an overall increase in demand for metals, particularly from China. This has meant an inevitable increase in prices, especially for non-ferrous London Metal Exchange (LME) traded metals. The emphasis for insurance remains on the high limits and capacity required for storage and the risk of misappropriation. However, there is a strong market for these products and, in the absence of any major losses, rates are likely to remain low. With the world slowly moving out of recession, the insurance markets continue to view commodities as an attractive opportunity.
Willis | Mining Market Review 2011 | 39
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Page 38 and 39: marIne CaRgo In 2009 our message wa
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InterVIew on m&a and rIsk managemen
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dIsaster management
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When your HR people interview prosp
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When things go majorly wrong, organ
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