The World for Sale

1. Commodity traders: The hidden titans of global commerce

Few of us experience their might as directly as the Libyans, but whether or not we know it, we are all their customers.

Global impact. Commodity traders are essential cogs in the modern economy, handling vast quantities of natural resources that underpin our daily lives. From the oil in our cars to the metals in our smartphones and the food on our plates, these traders facilitate the flow of crucial commodities across the globe.

Secretive operations. Despite their enormous influence, commodity traders have long operated in the shadows, little noticed and little scrutinized. Companies like Glencore, Vitol, Trafigura, and Cargill handle a significant portion of the world's traded resources, yet remain largely unknown to the general public.

Political and economic power. The traders' control over the flow of strategic resources has made them powerful political actors. They have shaped history by:

• Bypassing UN sanctions to sell oil to Saddam Hussein's Iraq
• Swapping sugar for oil with Fidel Castro's Cuba
• Selling millions of tonnes of US wheat to the Soviet Union during the Cold War
• Raising billions in financing for Russian oil giant Rosneft

2. From mailroom to millions: The rise of legendary traders

For the traders, it was a call to action. They set off on a hunt for resources that encompassed every country on the globe.

Humble beginnings. Many of the industry's pioneers started from modest positions. Marc Rich, who would become one of the most influential oil traders, began his career in the mailroom of Philipp Brothers. This pattern of starting from the bottom and working up through the ranks was common in the industry, instilling grit and an intimate understanding of the business.

Global vision. Traders like Theodor Weisser, Ludwig Jesselson, and John H. MacMillan Jr. recognized the potential of international trade before "globalization" became a buzzword. They built businesses that spanned continents, connecting resources from one part of the world to demand in another.

Risk and reward. The commodity trading business required:

• A willingness to operate in challenging environments
• The ability to build relationships with powerful figures in resource-rich countries
• A appetite for risk and speculation
• Adaptability to rapidly changing political and economic landscapes

3. Oil crises and political upheavals: Traders' golden opportunities

The commodity traders had emerged from wild and dangerous deals of the 1990s with businesses stretched across the world, from Communist Cuba to the rapidly growing capitalist nations of Eastern Europe, with a whole array of dictatorships and failed states in between.

Profiting from chaos. Major geopolitical events, such as the 1973 oil crisis and the Iranian Revolution in 1979, created enormous opportunities for commodity traders. As traditional supply chains were disrupted, traders found ways to move resources and make substantial profits.

Navigating embargoes. Traders like Marc Rich became experts at circumventing international sanctions and embargoes. They developed complex networks and creative methods to continue trading with countries like Iran, South Africa under apartheid, and Cuba.

Emerging market pioneers. The collapse of the Soviet Union in 1991 opened up vast new opportunities for commodity traders. They were among the first to venture into the newly independent states, connecting their resources to global markets and often making fortunes in the process.

4. Futures and financialization: Reshaping commodity markets

The financialisation of the oil market, with the arrival of futures, options and other derivative contracts that Hall had exploited masterfully during the first Gulf War, opened all sorts of new possibilities for the traders.

New financial tools. The introduction of futures and options markets for commodities, particularly oil, in the 1980s transformed the industry. These financial instruments allowed traders to:

• Hedge their risks more effectively
• Speculate on price movements without handling physical commodities
• Handle much larger volumes of trade

Wall Street enters the game. Banks like Goldman Sachs and Morgan Stanley became major players in commodity trading, bringing sophisticated financial techniques to the industry. This increased competition and complexity in the markets.

Information advantage erodes. As financial markets developed and information became more readily available, the traditional edge of commodity traders – their superior market intelligence – began to diminish. This pushed traders to seek new ways to maintain their profitability, including investing in physical assets.

5. The fall of Marc Rich and the birth of modern trading giants

In just a year and a half, his former employees had secured full ownership of the company, and removed his name from the door.

Rich's downfall. Marc Rich, once the most powerful commodity trader in the world, became a fugitive from US justice in 1983, charged with tax evasion and trading with Iran during the hostage crisis. This marked the end of an era in commodity trading.

Birth of Glencore. Rich's company was taken over by his employees, led by Willy Strothotte, in a dramatic boardroom coup. They renamed the company Glencore and set about transforming it into a more respectable, publicly-traded entity.

New generation of traders. The fall of Marc Rich paved the way for a new generation of traders and trading houses to rise to prominence:

• Ivan Glasenberg at Glencore
• Claude Dauphin at Trafigura
• Ian Taylor at Vitol

These new leaders would shape the industry for decades to come, balancing the swashbuckling spirit of earlier traders with a more corporate approach.

6. China's economic boom: Fueling unprecedented commodity demand

China hit the commodity sweet spot around the time that Davis wrote his Xstrata memo: its GDP per capita reached $3,959 in 2001.

Explosive growth. China's rapid industrialization and urbanization in the 2000s created an insatiable appetite for commodities. The country's demand for resources like iron ore, copper, and oil skyrocketed, driving global prices to record highs.

Commodity supercycle. The surge in Chinese demand, combined with similar growth in other emerging markets, led to what economists called a commodity "supercycle" – an extended period of high prices across a wide range of natural resources.

Traders' windfall. The China-led boom resulted in enormous profits for commodity traders:

• Glencore's profits exceeded $1 billion for the first time in 2003
• Vitol, Glencore, and Cargill made a combined $76.3 billion from 2002 to 2011
• Traders expanded their operations, investing in mines, oil fields, and infrastructure

7. Glencore's IPO: Unveiling the secretive world of commodity trading

Glencore's IPO marked the crystallisation of the riches of the commodity boom.

Record-breaking listing. Glencore's initial public offering in 2011 was the largest ever on the London Stock Exchange, raising $10 billion and catapulting the company into the FTSE 100 index.

Wealth revealed. The IPO exposed the enormous wealth accumulated by Glencore's top traders:

• CEO Ivan Glasenberg's stake was worth $9.3 billion
• Seven billionaires were created among Glencore's partners
• The top 13 employee-partners were collectively worth $29 billion

Industry spotlight. Glencore's IPO brought unprecedented attention to the commodity trading industry:

• Previously secretive companies were forced to disclose more information
• The scale and profitability of commodity trading became widely known
• Regulators, journalists, and the public began scrutinizing the industry more closely

8. From middlemen to empire builders: Traders' expanding influence

As others followed his example on an ever larger scale, the trading houses became not just middlemen, buying and selling oil, metals and grains around the world, but little empires of infrastructure critical to the flow of global trade, much of it in emerging markets.

Asset acquisition. Commodity traders increasingly invested in physical assets such as mines, oil fields, storage facilities, and ports. This strategy allowed them to:

• Secure supplies of commodities
• Gain more control over the supply chain
• Diversify their revenue streams

Vertical integration. Traders like Glencore became major producers of commodities, not just traders. For example, Glencore became:

• The world's largest exporter of thermal coal
• The largest miner of zinc and a top producer of copper
• A significant player in grain production and processing

Financial evolution. To fund their expansion, trading houses sought new sources of capital:

• Some, like Glencore, went public
• Others issued bonds or sought investments from sovereign wealth funds
• This brought greater scrutiny but also gave traders unprecedented financial firepower

9. Financing nations and shaping geopolitics: The new merchant princes

With bigger deals, they oversaw larger amounts of money. Now, they had the ability to finance entire nations – and to help others into being. They were no longer just traders of commodities, but merchants of power.

Lenders of last resort. Commodity traders increasingly acted as financiers for resource-rich but financially struggling countries:

• Glencore lent billions to Chad, becoming a crucial creditor to the country
• Vitol provided over $6 billion in loans to Kazakhstan's state oil company
• Traders financed Kurdish oil exports, indirectly supporting their push for independence

Political influence. While traders often claimed to be apolitical, their financial dealings had significant geopolitical implications:

• They helped prop up authoritarian regimes in exchange for access to resources
• Their loans and prepayments for commodities gave them leverage over government policies
• In some cases, like Kurdistan, trader financing emboldened independence movements

Global reach. Commodity traders became conduits between the developing world and global financial markets:

• They raised money from banks, pension funds, and other investors
• This capital was then deployed in high-risk, high-reward deals in frontier markets
• The traders' willingness to operate in challenging environments made them indispensable to both resource-rich countries and global investors

Last updated: January 23, 2025