The gold market

 Stephanie Reber
Romain Vaucher
The gold market
Telephone interview with Mr. Thierry Moret CEO of NBF International.
Subject : What are the primary factors that influence the Gold Market.
What influences the gold market and what are the actors of
the market?
The investment choice on gold is always done by an analysis of the supply and the
demand. In contrast to other commodities, gold prices are not only dependent on the
current mine production and processing demand but are also influenced to a great
extent by the supply and demand behavior of existing and potential owners of gold.
In other words, the investment motive is a much more important driver in the gold
market than in the market for other commodities. Gold is also a protection against the
inflation and the dollar variations. Generally when the dollar is slow, the investments
are good then Gold is also good. An inflation risk is a factor for an increase in Gold.
• The demand
Jewellery demand
Jewellery is the principal factor for the demand of Gold (nearly 70 percent of the
global demand). The USA is the largest market for gold jewellery.
Investment demand
The demand for investment in gold is quite high (nearly 20 percent). Gold is a sure
investment and can be an investment of replacement. It’s considerate as a tool of
diversification.
Industrial demand
The last kind of Gold demand is the industrial one, for example, gold is useful for
computer conception.
• The Supply
Production
Gold comes from Gold mines (there is nearly 400 gold mines around the world).
Mines extract 2550 tons of gold by year.
‐ 1 ‐ Recycling
The gold recycling guarantees an easy way to put Gold on the market. It is 23
percent of gold production by year.
Banks
Banks have Gold for their reserves. The sector is today a seller. That’s why banks
sell gold.
There is 4 type of investment in Gold, the Gold purchase, the investment in gold
mines society, the futures and the trackers and certificate.
• Relation with other commodities
Gold has a dynamic supply and demand so it’s very volatile and doesn’t depend on
other commodities.
The average correlation between weekly price changes of gold and oil throughout the
last 20 years is low; the correlation with gold is slightly higher but remains below 0.2.
Both correlations have varied heavily within the period; currently, they are clearly on
the high side.
• The dollar
The price of gold often moves in the opposite direction to other financial assets, in
particular to the US dollar. This relationship appeared to be consistent over time and
across exchange rates. If the dollar appreciates, the dollar gold price falls, while a fall
in the dollar relative to the other main currencies produces a rise in the gold price.
It provides protection when the dollar is losing value, with relatively little loss of
upside during a period of dollar appreciation.
• What is the future of gold?
The anticipations of supply and demand are positive because of the high demand in
Asia. This element is going to maintain gold high or increase it. (The power of
purchase in Asia increase faster than the Gold price. That increases the demand.
That’s why investing in Gold for the future can be good but it’s important to keep the
idea that gold is very volatile and it’s hard to anticipate the market.
‐ 2 ‐ Dominique Perrinjaquet Afrah Ahmed Julien Benamran Yvan Methenitis Diwakar Dixit, Economic Affairs Officer, Agriculture and Commodities Division World Trade Organization, Geneva In Africa, the self‐sufficiency of rice diminishes each year (the consumption is growing faster than production). Thus Africa needs to import more and more rice (although one third of the worlds import rice is already in Africa, which represented approximately 2 billion USD in 2006). What are the key factors which could influence positively the ratio of self‐sufficiency in Africa and give a possible solution to this worrying scenario? The multilateral rules as contained in the WTO Agreement on Agriculture focus on all measures affecting trade in agriculture. In broad terms, the WTO rules under the Agreement on Agriculture cover three aspects: (i) Market access, (ii) Domestic support and (iii) Export competition. In that sense, there are no direct multilateral disciplines under the WTO to cover such typically domestic policy related aspects like "self sufficiency". So the WTO itself does not have much influence. If a measure is taken by WTO Member country on the ground of meeting "self sufficiency" objectives in the form of say direct subsidization of farmers, relevant domestic support rules and commitments of Members under the Agreement on Agriculture would apply and need to be respected. Thanks to the measures taken by the government to boost domestic rice production and reduce imports of rice, Nigeria has been able to reduce the importation of rice in 2005 to over 800,000 tones. One possibility to boost the domestic production is subsidies. What are the positive and negative consequences of subsidies in Africa? How far the WTO can influence the decision of a government regarding subsidies? There are multilateral rules on subsidies under the Agreement on Agriculture as well as under the Agreement on Subsidies and Countervailing measures to be followed by WTO Members. The issue of impact of subsidies by producing countries on other Members is an analytical one. On one hand subsidies by country may impact negatively on domestic production (as well on exports) of another country; on the other hand an importing country might see a benefit in procuring/importing cheaper rice resulting from domestic or export subsidies of other countries. Anti‐dumping measures are put in place within the WTO which allows the member states to ‐ 3 ‐ protect their national industries. Would it be possible for a local NGO or a foreign government to denounce a dumping on behalf of a victim country (in the case of a poor country)? The Agriculture and Commodities Division is not the relevant Division concerning these issues. You may like to be in touch with the relevant Rules Division of the WTO. In broad terms, I can mention that anti‐dumping instrument under the WTO Anti‐dumping Agreement is supposed to be applied to counter an injurious effect on the domestic industry resulting price‐discriminatory practices of individual exporters whereas the countervailing duty under the Agreement on Subsidies and Countervailing Measures* could be applied to countervail injurious effects of subsidized imports happening due to exporting government's subsidy measures causing benefit to specific enterprise or industry. I should also mention that the disciplines under Agreement on Subsidies and Countervailing Measures cover many aspects other than the countervailing measures. Diwakar Dixit has stated that the answers are his informal comments and not at all the official responses or view points of the WTO Secretariat *Countervailing duties are a means to restrict international trade in cases where imports are subsidized by a foreign country and hurt domestic producers. According to WTO rules, a country can launch its own investigation and decide to charge extra duties, provided such additional duties are in accordance with the WTO's Dispute Settlement System. Since countries can rule domestically whether domestic industries are in danger and whether foreign countries subsidize the products, the institutional process surrounding the investigation and determinations has significant impacts beyond the countervailing duties. ‐ 4 ‐ Pietro Magialetti, Jean‐Louis Perren The Kyoto Protocol and its implications What is the Kyoto Protocol? There are two significant international agreements which establish the framework for
reduction of greenhouse gases. The Kyoto Protocol is an international treaty on
climate change which was proposed in 1997 and entered into force in February
2005. It amended the United Nations Framework Convention on Climate Change
(UNFCCC) which was proposed in 1992 and entered into force in 1994. Those
countries in Annex B to the Kyoto Protocol committed to reducing their emissions of
carbon dioxide and five other greenhouse gases from 1990 levels to certain agreed
levels by the end of 2012.
The Kyoto Protocol provided for and recognized three forms of emission reduction by
those countries in Annex 1 to the UNFCCC:
1.
Emissions trading (Article 17 of the Kyoto Protocol);
2.
Clean Development Mechanism (CDM) (Article 12): import of Certified Emission
Reductions (CERs) from a developing country (non-Annex 1) to an industrialized
country (Annex 1);
3.
Joint Implementation (JI) (Article 6): import of Emission Reduction Units (ERUs)
from an industrialized country to another industrialized country.
Why should an investment bank be interested in the Kyoto Protocol?
With Investment banks being integral in areas of project finance, risk management,
securitization, and trading, the Kyoto Protocol offers a number of areas where
interaction can be found.
Banks can offer finance to fund clean technology projects in the developing world,
through this finance the bank can gain direct exposure to projects as well as provide
financing and risk mitigation to companies who wish to secure Kyoto credits, such as
Power producers in the Developed World.
The Kyoto protocol also allows banks to expand their product lines, through exposure
to all elements within Kyoto banks can securitize and offer diversified products to its
client base; from Hedge funds to industrials.
Finally banks can derive value from the trading processes that have derived from the
Kyoto protocol adding value to the banks’ product range and internal revenues.
Investment banks will provide liquidity and so price clarity for greenhouse gas
emissions by participating in proprietary trading of the instruments.
‐ 5 ‐ Who are the players involved in the EU ETS? Who are the market participants?
The large producers of CO2 are mainly the intensive energy consuming industries
(aluminium, paper, cement …) and the power producers based in the EU.
The smaller industrials are purchasing their requested certificates through their usual
energy supplier, the bigger ones are directly active on the market as the EUETS
purchase became for them a strategic activity.
More generally, all the energies players are market participants as the EUTS price is
highly correlated to the other energy prices.
You will also find, as explained above, all the financial institutions (investment banks,
hedge funds …) which will provide finance for projects, manage the market, credit
and project risks for those involved in the market that cannot do that themselves
because of certain constraints. Banks will also invest in JI and CDM projects, originate
or buy, and so encourage the production of CERs and ERUs, and then contribute to
risk management of the products and their pricing by proprietary trading.
What are the main price drivers of the EUETS?
The price of the European Union Emissions Trading Scheme (EUETS) is affected by a
number of economic, political and meteorological factors.
Economic factors include the cost of fuel and electricity for industrial processes and
the performance of the world economy.
Since, the allowances available in the scheme are set by the European Commission;
the price is heavily influenced by political interference. In addition the EU sets how
many allowances can be brought into the scheme from developing nations.
The weather has a huge potential to influence the price of the scheme. For example
in a dry year, little electricity will be produced from hydro generation (zero CO2
produced) and instead this will be replaced by the dirty fuels of Coal and Oil which
produce approximately 0.9t of CO2 for every 1 tonne of fuel consumed. In the
shorter term a lack of wind has a similar effect on the price.
As of today, do you think the implementation of the Kyoto Protocol has been a
success? Kyoto Protocol what’s next?
The implementation of the Kyoto Protocol has been extraordinarily successful in
the sense that it has brought into existence a commercial compulsion to reduce
greenhouse gas emissions through pure intellectual invention. Further, it has had a
real effect. For example, there has recently been such reduction in the uncontrolled
‐ 6 ‐ emission of hydroflourocarbons through a combination of the Kyoto and Montreal
Protocols that the hole in the ozone layer is decreasing in size. In this regard, the
Kyoto Protocol is in perfect contrast with what are termed green taxes.
They are suggested by some to be an alternative to the Kyoto Protocol in addressing
climate change. However, green taxes simply impose a cost on certain industries
that produce greenhouse gas emissions, but not to such a degree to cause any
discouragement. And in any event, none or very little of the money raised by such
taxes is actually used to improve the environment.
In spite of the success of Kyoto, it is now essential that a further convention to deal
with greenhouse gas emissions is agreed as soon as possible to deal with the period
after 2012. At least, it is important for industries such as power producers to know with
certainty the costs of investment for the medium-term future (and emissions prices
are fundamental part of such costs). Also, it is essential to determine what if anything
the very large emitting countries such as China, India and the US will do.
Interview realised with:
Sabry CHEIKHROUHOU
Managing Director - Energy Trading
Bear Stearns International Limited
One Canada Square
London EC14 5AD
Cedric Cubizolle; De Sousa Alexandre , sunisia ‐ 7 ‐ Interview
du
Prof. Dr. Christian Daniel Assoun
La problématique du CO2
Dioxyde de Carbone MM=44
Introduction
Avec le protocole de Kyoto, le CO2 est devenu une « commodity » échangeable sur des
marchés structurés tels que l’EEX (European Energy Exchange), le CCX (Chicago Climate
Exchange) ou l’ECX (European Climate Exchange). Le trading des matières polluantes est
basé sur un droit à l’émission à l’instar du system du SO américain dont le protocole de
Kyôto s’est inspiré.
Ce principe de droits à l’émission est souvent critiqué. Bien que ce système incite à réduire
la production de CO2 dans nos pays, le revers de la médaille est plutôt cynique pour
beaucoup car il autorise en fin de compte à polluer. Selon beaucoup d’experts, il serait bien
moins efficace qu’une taxe due directement sur les émissions qui elle inciterait tous les
acteurs du marché à réduire leurs émissions dans des proportions plus importantes. Une
autre critique souvent avancée réside dans le déplacement des centres de production
polluants vers des pays possédant une législation plus laxiste en la matière, ou dans notre
cas pas astreint à l’obligation de réduction du protocole de Kyoto. Bien que cette option ne
soit pas envisageable pour les plus grands pollueurs (centrales électriques p.ex) c’est une
réalité du marché.
Bien sûr ce sont les des critiques à un système qui à également ses avantages, à savoir
permettre une transition moins dure économiquement parlant pour les entreprises polluantes
malheureusement souvent indispensables. En effet, les industries les plus polluantes sont la
production d’électricité à partir d’énergie fossiles (charbon, pétrole ou gaz), l’industrie lourde
telle que les aciéries ou la destruction de nos déchets dans des centrales d’incinération.
Au final, ce qui compte véritablement, c’est de constater qu’autour de ce gaz a effet de serre,
il y a une véritable volonté politique d’agir, des technologies qui voient le jour et bien d’autres
qui se développent afin de limiter les effets nocifs que l’on connaît. Par conséquent,
économiquement, il existe aussi des investisseurs intéressés par ces enjeux qui a terme
résulteront par un marché florissant.
Le choix de notre interview
‐ 8 ‐ C’est dans ce contexte compliqué que nous avons décidé de sélectionner notre interview.
Nous avons décidé de nous intéresser aux alternatives viables et aux droits à l’émission car
il existe des solutions pour réduire voire annuler les effets de ces productions sur notre
environnement et notre atmosphère.
Nous avons déjà présenté sur notre site web www.ge4u.ch les possibilités de capture et de
stockage du CO2. Elles présentent de nombreux avantages dont celle d’être faciles à mettre
en place et ce pour coût avantageux. Qui plus est, ces techniques peuvent être utilisées sur
des poches de pétrole ou de gaz, ce qui réduit considérablement le coût des infrastructures.
Mais ce système présente un désavantage majeur. Nous ne faisons que stocker notre
pollution et il existe donc un risque majeur de pollution. En effet, il arrive que des poches
d’argile, dans les quels le CO2 est stocké, puissent casser… Et dans ce cas, la question est
de savoir quelle influence ceci pourrait avoir sur notre environnement sachant que dans tous
les cas, il ne s’agit que d’un report du problème vers les générations futures.
Nous avons donc décidé de nous intéresser à des solutions moins connues et moins
médiatiques. A savoir la destruction du CO2 par plasma. Ce procédé inventé et breveté par
un scientifique reconnu habitant à Genève, présente de nombreux avantages. Seul le coût
d’investissement au départ peut représenter un frein à son expansion rapide. Mais nous
croyons profondément que ce système pourrait répondre avantageusement aux problèmes
de pollutions et de réchauffement de la planète.
L’interview
Dédiée à la HEG Genève dans le cadre de travaux de groupe d’étudiants.
Pouvez-vous vous présenter en quelques mots ?
Je suis physico-chimiste de formation, je suis spécialisé depuis 1979 en spectroscopie
atomique et j’ai enseigné la physique dans plusieurs Universités Européennes.
Je suis un ex- Conseiller scientifique et technique de la NASA pour les ressources extra
terrestres.
Par ailleurs j’ai développé plusieurs entreprises liées à la bio-médecine environnementale
dont je m’occupe actuellement (Glycan Group) et je dirige un Laboratoire d’Analyses
Médicales à Genève.
Notre groupe a développé des technologies très innovantes en matière de dépollution
HYDROPOOL et TERMINATORR (procédés brevetés PCT )
Pouvez-vous nous décrire votre invention ?
HYDROPOOL permet d’éliminer les métaux lourds et toxiques des boues municipales et
évite leur incinération qui produit des quantités importantes de dioxines et PCBs mais aussi
‐ 9 ‐ de CO2 de manière massive ainsi que le rejet de métaux lourds et toxiques dans
l’atmosphère.
TERMINATORR (8m de diamètre) permet de casser la molécule de C02 ou de CO
(monoxyde de carbone) et de rejeter dans l’atmosphère des éléments naturels chimiques
simples (Carbone et Eau)
Terminatorr détruit également et définitivement les molécules dangereuses comme les
dioxines et PCBs (dérivés Chlorés)
TERMINATORR fonctionne sur le principe de la chimie des hautes températures (plasmas
physiques) 7000 à 10000°C
Qu’est-ce qui vous à poussé à mettre au point une solution de destruction du CO2 ?
La destruction du CO2 via Terminatorr est un SPIN OFF de l’invention qui au départ avait un
but de dépollution militaire (destruction des surplus de stock d’armes de destruction massive
USA (MWD).
Ensuite la version civile a prédominé et voici deux années que nous avons envisagé son
application pour la diminution des productions de CO2 de l’industrie.
Pour le moment le procédé miniaturisé ne peut pas être appliqué aux moteurs thermiques en
général (voitures, camions, trains ou avions)
Quels sont les principaux freins à la mise en place de ce système ?
Il n’existe aucun frein fondamental pour l’application de ces procédés à l’industrie militaire,
civile ou domestique en général.
La réglementation nous appuie, les partenaires industriels et financiers sont présents, le plan
se mettra en application certainement basé en Suisse, si les autorités manifestent un intérêt
probant.
Quelle influence ce procédé pourrait avoir sur le marché des émissions en général et
plus particulièrement sur le CO2 ?
En ce qui concerne le marché des émissions ou quotas marketables du CO2, cette
conséquence stratégique n’a pas été analysée dans le groupe, le souci initial étant la
résolution de cette équation dangereuse pour le moment.
L’influence sera dépendante des réglementations en place et des volontés des producteurs
de CO2 à appliquer ces règlementations y compris s’équiper de nos techniques.
Il est trop tôt pour se prononcer surtout à notre niveau de fabricant, seuls des économistes et
géopoliticiens pourront répondre dans quelques années à votre question.
‐ 10 ‐ On pourra réaliser dans 6 mois des prévisions ou plutôt « prédictions pseudo rationnelles »
de l’évolution de ces technologies de dépollutions.
Quelle est votre position par rapport aux évolutions du marché en CO2 ?
L’analyse de notre incidence sur la problématique du CO2 est prématurée, notre étude
complète de marketing industriels liés à nos procédés devrait dégager des lignes directrices
importantes.
Remarques personnelles :
6 à 9 mois d’études sont nécessaires pour mener à bien de telles études avec des
spécialistes avant de prendre des paris sur la régulation markteble du CO2, affaire à suivre
…
Conclusion
Ce procédé représente une véritable opportunité pour les pays qui se sont engagés à réduire
leurs émissions de CO2 et plus largement de réduire tout les types de pollution (Dioxine,
PCBs ou Furannes). C’est une alternative véritablement intéressante face au stockage du
CO2 qui ne fait que reporter le problème sur les générations futures. Les procédés de type
Terminatorr et/ou Hydropool quant à eux, détruisent le CO2 et un large spectre de polluants.
Nous pensons que ce type de procédés possèdent un véritable avenir et nous nous
intéresserons de près à son évolution dans les années avenir.
L’avis du trader
Le protocole de Kyoto à permis de créer des bourses de CO2 dont le futur est encore
incertain et très fortement influencé par les quotas attribués par les politiques. Qui plus est,
l’échange sur ce marché n’est prévu que jusqu’en 2012. Il existe donc une forte incertitude
quant au remplaçant, s’il y en a, des bourses actuelles de CO2.
Nous pensons que le futur est à la réduction ou/et l’élimination de la production de CO2
plutôt qu’à l’échange de droits de pollution. Ce n’est pas pour autant que nous jugeons que
les bourses d’aujourd’hui ne sont pas une bonne idée. Au contraire elles auront permis une
transition en douceur en obligeant les entreprises polluantes à se remettre en question. En
somme, elles auront joué leurs rôles de régulation du marché.
Pour les industries les plus polluantes, ce marché peut même se révéler incitatif dans
l’acquisition des technologies de réduction de pollution. En effet, le jour où les droits de
pollution leur coûteront d’avantage que l’achat de quotas, la loi économique jouera son rôle
au profit de ces technologies.
‐ 11 ‐ Pour analyser l’évolution du marché dans ce sens, nous l’avons décomposé en deux
phases.
Première Phase, il est raisonnable de penser que le système des bourses d’échange
favorisera les programmes de réduction/destruction de la pollution à la source et que les
entreprises agiront donc au-delà de leurs quotas (puisque le co2 pourra être totalement
détruit). Toujours dans une première phase, le prix de revente des quotas inutilisés pourrait
permettre de financer les technologies après leur implémentation.
Deuxième phase, les technologies ont intégré le marché et leur effet sur les bourses se fait
ressentir. Bien que les politiques réduisent les quotas, les entreprises n’ont pas à acheter
des droits qui leurs sont désormais inutiles. Ainsi, à long terme, on pourrait voir les bourses
s’effondrer au même titre que pour le marché du spot actuel où là tonne de Co2 est cotée à
peine à 0.05 Euros à cause des quotas trop généreux que les états ont attribués.
A ce moment même, les bourses cesseront d’exister puisque la pollution serait trop faible.
Evidemment, tout ceci se fera sur le très long terme mais voilà notre brève analyse
concernant l’avenir de ce marché compte tenu de l’interview réalisée.
Remerciement
Nous tenions spécialement à remercie Monsieur Prof. Christian Daniel Assoun pour le temps
qu’il nous a accordé malgré sont emploi du temps particulièrement chargé.
‐ 12 ‐ Jeremy Gehring, Julien Liengme Interview of Mr. Didier Fert, Director of Riverlake shipping company 17.10.2007, Geneva: • How can you describe your company’s activity? Our core business is the transport of petroleum and derivates products. We are mostly present in the northern hemisphere seas. We have two main activities. First we work as intermediary (freight forwarder) between shipowners and charterers. The second one is the management of tankers that belong to huge trading companies. For this second activity, Riverlake created a holding named Swiss Tanker Management SA. • What is the difference between a shipowner and a freight forwarder? In any case, the ships belong to the shipowner. The shipowners can provide freight through freight provider like Riverlake. But they also can rent boats to Trading companies that want to manage their shipping by themselves, like Shell, BP or Total. In opposition to a shipowner, a freight forwarder doesn’t own any boat. It works as an intermediary on this industry. Actually a freight forwarder arranges deals, between charterers and shipowners, which means that we make the link between the demand and supply in the shipping industry. A freight forwarder will look for boats availability on the demand of the charterer and try to place all the vessels belonging to the shipowners. •
There are many traders and few shipowners, how is organized the competition in this market and who the power belongs to? It is interesting in fact, because the vessel providers are very concentrated. And we could imagine that they have a large breathing space. It actually all depends on the supply and demand. If a trader has needs in shipping and has the possibility of making a deal with different shipowners, in this case, the power belongs to the trader. Indeed, the trader will start negotiating lower prices on the market, which put the pressure on the shipowner. The competition is intense and the most important variable is the price. Usually traders don’t look for anything else than a cheap freight. What happened if a shipowner refuses a deal, is that he will in any case have to pay fix charges on its vessel. A vessel that is not sailing costs a lot. It is like a city and even if it doesn’t move (bringing back money to the owner) the city consumes a lot of energy. A vessel that is not sailing can need until 50tons of fuel. So shipowners are in a way obliged to make their boats travel. ‐ 13 ‐ If the availability of boats is low and traders really need to ship their oil, the power in this case could belong to the shipowner. But in reality, many trading companies have their own fleet and can influence the shipping market as well. As example Total owns about 150 tankers. Is the market of tankers working the same way as the container freight market? No, the container market is much more organized than tankers or dry bulk ships. The net of containers is organized like a railroad line, with well‐defined timetables and routes. The tanking is not organized, but adapted to the supply and demand around the world. A shipper cannot move from a shipping industry to another. The boats are not the same and the commodity markets are very different. • Who is responsible for the goods? Usually, the shipowner pays the insurance for the transport and is responsible for the goods as soon as they are shipped on the vessel. Before the goods being shipped, the charterer is responsible. This is regarding the maritime law, but when there is an accident like for instance when the Erika cost away, Total was legally not responsible, but everyone put its finger on it. It was much more interesting for the world to criticize Total, which is a very well known company that needs to take care of its image. Total couldn’t ignore its part of responsibility in this catastrophe and had to afford part of the damages. From now, the charterer cannot feel that innocent almost if it is chartering dangerous products like oil. Before Erika, the charterers didn’t care about the vessel conditions and the security of transport. They were not responsible and always looked for the cheapest shipping. Cheap shipping means obviously a cheap vessel. Charterers are not ignorant of the reason why some vessels are cheap and other not. It depends on the age and security of the boat. That is why many old boats were sailing in very bad conditions of security. •
How are security conditions now? The arrival of CSM (Certificate of Safety Management) brought many changes in the shipping industry. Before CSM, the Captain was responsible for his vessel. And he was the one going to jail if any grounding happened. With the introduction of CSM, it is no longer the Captain responsible, but the head office. That increased drastically the incentive of the shipping company to improve the security of their vessel. The global fleet is now much more secure and old vessels are not renewed. The charterers also played an important role in this change. After the Erika, traders didn’t want to take the risk of having to feel responsible for such disasters: From now on, they take care at what kind of vessel transports their oil. Security and quality check lists have been introduced and for each journey a vessel does. It is controlled by the charterer so that the can valuate the conditions of the boat they use and manage the risk of transport. ‐ 14 ‐ The trading companies that make an effort and feel responsible are the well‐known companies like Total, BP or shell. Others private and unknown companies are still price‐focused and don’t integrate their responsibility in their strategies. This is also the role of company like us to appraise the vessel quality we provide to our client. For example, we were working with a shipowner, that didn’t want to improve its vessel security, and after insisting on him to make an effort; we had to stop working with. We also feel responsible for forwarding ships with bad security conditions. How is the price freight is fixed? The freight price is generally fixed by the market and involves the price of the good and the price of the transportation. But like we said before, depending on the demand and the supply, the freight price can either be lower or higher than the market prices. • What is the role of the fuel price on freight prices? There is not a clear correlation between oil price and freight price. It is anyway clear that the increase of fuel price will increase the freight price, but there are many other factors. Again it depends on the role of the demand and the supply. It mostly depends on how traders interpret the markets. If they are expecting an increase in oil price they will accelerate their shipping and it will inflate the freight price before the real increase of oil price. Freight price is much more about how people feel the oil market. It is not only related to effective price evolution. Fuel price influences commodity price if the ratio of freight price in the commodity is high. Oil is an expensive commodity and freight will not influence its price that much. Other cheaper commodities suffer much more the increase of freight price. Natural disasters can also influence freight price. As an example we can take the case of Katrina hurricane. Because of Katrina, a lot of oil well located in Gulf of Mexico had to stop working and The US started to import much more fuel from Europe and Middle East, which increased the demand in shipping to the United States. A lot of boats were taken from the Mediterranean Sea, which decreased the supply of freight in this area. Finally, all those boats that sailed to the United States couldn’t shore because of the bad weather and were stuck there 20 days. Again, that brings us to the point where demand is higher than supply and trading companies are ready to pay more than market price to ship their goods as quick as possible. ‐ 15 ‐ At the same period this year the freight increased because of the threat of new hurricane in Mexican Gulf. Finally nothing happened, but the market effectively suffered the increased of freight, even if the disaster didn’t take place. It is all about feeling. Drenush Shatri, Difei Xhao INTERVIEW ABOUT SHIPPING
Shipping – What influences this sector and how does it influence commodity prices?
In order to answer our questions on the shipping, we asked help from
M.Jonhson Tao, the general manager of Xpress shipping company working
more than 10 years in this sector.
At the beginning, we would know the activity of his company. It's a small
shipping operation company which works with about 10 ships on the sea.
As we are interested to know which are the feather influencing the sector of
shipping, we went immediatly to this theme.
What are the factors could influence the functioning of his shipping
company :
•
•
•
•
the price of fuel
war
offer and ask of maritime transport
the demand of the commodities trading market.
What are the implications of these factors on the price of commodities :
‐ 16 ‐ For the second question, as they are purely operator of logistic, they got a
viewpoint of their career.
The result of the factors mentioned can not be prevented. The goal of the
company is to know better analyze its environment, knowing how to manage
these changes and ensure better adapt to the logistical point of view, these
trends.
Otherwise, he thinks that the costs of shipping can influence the price too. It
contains, the capital cost, the operation cost, the financial cost and probably
the machine cost for the equipment to the ship owner. Here, he talked about
the rise of the cost price of the market; in general, it's not a rise of the cost in
only one or some of companies.
In conclusion, we think that, to know more about how the shipping influence
the commodities price we should maybe contact someone working in the
commodities future, he could be more skilled in this theme in having a more
global vision.
We want to thank Mister Johnson Tao for his help and the time he spent with
us.
‐ 17 ‐ International Trade & Management
Ibrahim Amin-Korraha, Marc Barros, Grégory Coppel, Nicolas Moullet & Pelin Sen
WTO Policy & Africa
Interview of
Dr. Anne-Sophie Nivet
Project Manager
IDEAS Centre
Rue de l’Arquebuse 10
CH – 1204 Geneva
Tel: 022 807 17 43
Email: [email protected]
What is your position at IDEAS Centre?
I am the Project Manager for the cotton project. I am in charge of the coordination of various
meetings and training programmes. I follow all the meetings that take place on cotton and
then I update our information. I am also in charge of the coordination between the Cotton 4
(C4) countries in Geneva. Every two weeks, I meet with the Ambassadors and the Technical
Counsellors from the C4 countries who have their Permanent Missions within the WTO to
discuss the current situation regarding cotton. All of these activities are done with the support
of my colleagues.
What is your educational level and your professional experience?
I hold a Ph. D in Political Science from the Centre d’Etudes d’Afrique noire (Bordeaux
University, France) and a Master of Research in African studies. As a researcher, I worked on
European Development and trade policies, regional integration in West Africa and aid for
trade issues. Parallel to my research activities, I taught political science and development
issues at the Institute of Political Studies (Bordeaux) and Panthéon-Sorbonne University
(Paris). I also worked as an occasional consultant for various French institutions (Haut
Conseil de la Coopération internationale, Direction générale de la Coopération internationale
et du Développement, Institut du développement durable et des relations internationales).
Why did the IDEAS Centre decided to concentrate on cotton? How does your
organization work? Who finances you? How is your organization able to have an
independent agenda? to what extent to donors determine allocation of funds? How does
IDEAS maintain an independent agenda?
IDEAS is a non-governmental organization which is financed by public funds dedicated to
improve the development of certain countries. Our main duties are political advice to
‐ 18 ‐ governments, assistance in negotiations and training senior ministry of cotton staff.
Switzerland is the principal donor but on certain projects such as this one, we work with
several different European donors such as Denmark, Sweden, Holland, France, Germany and
Great-Britain. Countries such as Spain or Greece are not part of our donors because they are
the biggest European producers of cotton. Switzerland was our first donor but with the
agricultural politic of the country, which is in contradiction with the position defended within
the WTO, Switzerland could not support this project by itself. How could the country justify
the fact that it is paying people to attack itself? We have never had any barriers in our
freedom of expression and our collaboration with the C4. It is quite incredible and the C4
admits it.
We are not against European countries neither against Americans; we are simply trying to
fight the subsidies. The Europeans subsidies are two times higher than the American amounts,
but their production is much lower so the impact on prices is negligible. Their subsidies are
not related to quantities but are there to help farmers who would like to change their
production from wheat to maze for example. On the other hand, American subsidies are paid
in relation to prices. This means that if prices fall down, the government compensates the
difference which in turn, incites farmers to produce more. 95% of the American subsidies are
allocated to five products: Soya, Wheat, Maze, Cotton and Rice.
The 25’000 American producers of cotton are politically very powerful due to the entire lobby
that stands behind them. If farmers were to stop and change their production of cotton for
maze, there would be a major problem for the grain producers who would then have to change
and develop maze grains. The real problem in all of this is the American industrial lobby.
IDEAS has been managing cotton for the last four to five years and is also involved in other
projects to support countries such as Tajikistan, Liberia, Serbia and Montenegro within the
WTO. These activities are more focused on the legal part of the accession of theses countries
to the WTO.
Within the context of the Cotton 4 (C4), Benin, Burkina Faso, Mali and Chad, our activity is
mainly focused on political and strategy advice to reinforce their capacities and development.
Togo could have been part of the C4 if it had a different political regime however, our
principal donors refused to deal with this type of country and from our standpoint that is
totally legitimate.
Don’t you think that on behalf of the WTO there is some laxity regarding the
implementation of agreements that have been ratified?
It is true that the rhythm of negotiations is very long, and if we take the example of the
“Uruguay Round”, the negotiations had lasted for eight years and ended in 1995.
The application of the agreements was expected to end in 2000. Today, in 2007, we are still
not sure that everything has been totally implemented.
In 2002, our director Mr. Nicolas Imboden who is a former negotiator in the WTO worked
with Mr. Arthur Dunkel former director of the GATT.
They both discussed with several African regional organizations and with European donors to
identify possibilities of reinforcing the capacity of development of African countries within
the WTO.
This decision was taken to improve the knowledge in international negotiations, due to the
lack of information that some countries have about the work done by the WTO.
After several meetings and discussions with organizations such as the UNCTAD and the ITC,
cotton was identified to be a fundamental raw material for countries of Western Africa. (C4).
Countries such as Senegal and Ivory Coast aren’t part of the C4 because they export other raw
materials such as peanut, coffee or cocoa. In theses countries, cotton doesn’t represent a vital
product.
‐ 19 ‐ The other main problem with cotton is the subsidies that are paid by certain developed
countries, especially United States of America and Europe. This problem can only be treated
by the WTO, which allows multilateral negotiations. This example was very interesting
because of the behaviour of the developed countries that have accepted and signed the
agreements and who continue paying subsidies to their producers and this injustice needed
support to be brought out on the international scene.
In 2002, Brazil had lodged a complaint against the United States about the subsidies paid to
cotton producers and had won the several lawsuits. Brazil has lodged a new complaint,
estimating that the U.S. hasn’t taken enough measures after being recognized as guilty. Benin
and Chad have taken part in this by bringing their support to Brazil as third parties.
The Africans have deposited their project on cotton before the Cancun round and it became a
huge success. 99% of the countries member of the WTO including the European Union had
given them their support. It was the first time that African countries, amongst the poorest,
were asking for the rules to be applied and weren’t begging for help. They were asking for
compensations for the damages occurred by subsidies. However, the Europeans changed their
minds at the last moment and since then, relations between the C4 and Europe have become
very difficult. On the other hand, the Americans weren’t prepared to this African project and
they managed to avoid the subject by blocking the negotiations. This brings us to the fact that
the Cancun’s round result was ambiguous because the Africans still succeeded in having the
cotton registered as a separate subject from agriculture. It became the first raw material to be
treated separately in the agenda.
What is the impact of those subsidies on African economies?
When the Cancun Round took place four years ago, the cotton industry was very healthy in
Africa. The impact of subsidies is therefore very important. Today, the economic situation has
changed and the cotton industry is very much in difficulties but not only because of the
subsidies.
Regarding several studies, if the American and European subsidies were banished, the cotton
price would see an increase of 10% to 20%. This is non negligible but the increase of interest
in biofuels has already influents the prices
The decrease of the subsidies wouldn’t be so important. We do not know yet if this will have
an impact on the long term. If the subsidies are banned, the European cotton will certainly
disappear. Furthermore, some recent studies have been made in the United States which
explains that even if the subsidies are removed 30% of cotton can disappear but the rest has a
consequent chance to survive without the subsidies.
Nevertheless, there are three other issues that have an impact on the African cotton. Firstly,
the reform in the cotton industry. The African have tried many times to privatised their
industry or tried to nationalized it like what had been done in Mali, but this has not had much
success due to the disappointing results on production and productivity. There is a real
structural issue. Secondly, the parity between euro and CFA is also creating problems. Due to
the increase of the euro, the American exportation have become competitive compared to the
African exports that have become more expensive. The second problem is the
competitiveness on the cotton industry. In Africa, the crop for cotton has been multiplied by
four in forty years but the production is still the same. However, the quality of African cotton
is non discussable. The African cotton is not irrigated and is collected by hand. The problem
is that during his transportation, the cotton is damaged because it is still transported in old
trucks and it takes a long time to reach the destinations.
So, due to those different issues, I don’t think that the subsidies are the major problem but it is
still important and it deserves to be looked at.
‐ 20 ‐ What would be the impact of the increasing interest of industrialized countries for
biofuels on cotton productions? What would be the impact for the C4?
Since 2006, there has been a growing interest of the United States for biofuels. The impact on
cotton was decreased of only 3% on their cotton production. However, this still has an effect
due to the increasing interest of American farmers in to the biofuels. During the past month,
we realized that the cotton price had increased. This is the reason why American farmers find
it difficult to change from cotton productions to corn productions by instance. In the United
States, all the production is done by machines that are very expensive and cannot be used for
other materials. Now, if we look on the long term, I don’t really know what can happen.
We should follow the evolution of biofuels. For now, the opinions are very much diversified.
What we can say is that the interest in biofuels has increased so the increase of the prices of
cereals will certainly have an impact on African economies. This is finally just transferring
one problem to another.
What would be the consequences if the Doha Round was to fail?
On the cotton itself, there wouldn’t be important economic impact because there would be no
real results. The impact would be higher on the credibility of the multilateral system due to
the important part of the development in this round. If this fails because of the selfishness of
the United States or the European Union or others countries this will reinforce the bad image
of the WTO in the civil society. The cotton has become very emblematic, showing that poor
countries could have a massive impact on negotiations within the WTO. If this fails, those
countries would be very much disappointed as well as their farmers. This will also show that
the WTO is not as good as they should be in negotiations and would remain as a commercial
organisation. The fact that the negotiations last so long is increasing the number of procedures
that are deposited at the WTO. I think that the failure of Doha is possible, and if nothing
happens before Christmas, nothing will ever change.
To end this interview, how do you see cotton’s evolution in the future?
I think that if China continues importing cotton, the market will remain important. If we look
at Africa, their future market should be the Chinese demand. The C4 should work on bilateral
negotiations with China instead of on a multilateral negotiation. In the context of multilateral
negotiations, there is solidarity between the developing countries so they cannot ask to the
emerging countries to open their market. This would be seen as treason for the other
developing countries. The Africans have already a bilateral negotiation on cotton with Brazil,
but being an exporting country, it facilitates the accession to markets. They also have bilateral
negotiations with India, but India is also an exporting country. So, it is very important to have
access to the big markets like China, Pakistan or Turkey, which are countries, who import
cotton and export finished goods.
The future market on cotton is with these emerging countries. The United States still remains
as the world biggest cotton producer, 40% of the world cotton production. This production
should decrease and I also think that finally the European cotton will disappear. This is
already the case in Portugal, where the cotton production represents only 1% of national’s
production. The question is more complex with Greece where the national cotton represents
8% of national’s agricultural production and holds 100’000 small farmers.
The C4 should quickly specialized themselves on the transformation of cotton to stay
competitive even if the last try was not successful. We shouldn’t forget that China is
increasing their cotton production and this will be an issue for African farmers to produces
finished goods.
There are also some new market opportunities such as the market on organic cotton (bio) or
on ethic cotton (which follows an ethic way of production and transformation). However, the
‐ 21 ‐ tracability of this ethic cotton is not easy. There are already some organisations who work on
those new markets and who are looking for other ways to use cotton. For instance, cotton oil
or cotton flower, which are used in cosmetics by African countries, even if this is still not very
developed in Europe. We will see how things will change.
Barbieri, Kahraman, Acerbis, Haering Nom et Prénom : M. Von Rohr Stephan, Société: Banque Julius Baer & Co Ltd, Position: Directeur au sein du service « Forex Geneva ». ¾ Etudiants HEG : « Quels sont pour vous, les facteurs principaux qui influencent le marché de l’or ? », ¾ M. Von Rohr S. : « D’un point de vue général les fondements du marché de l’or résidents dans l’intérêt et la fonctionnalité de ce métal précieux et aussi par ses caractéristiques de valeurs refuges ». ¾ Etudiants HEG : « D’accord, mais est‐ce que vous pourriez nous en énumérer quelques uns? » ¾ M. Von Rohr S. : « Il y a tout d’abord le secteur de la bijouterie qui représente plus de 50% de ce marché et également celui du secteur industriel (soins dentaires). De plus, après la saison des pluies, les fêtes et les mariages devraient reprendre dans des pays comme l’Inde et avec l’approche des fêtes au Etats‐Unis, la demande devrait croître. En d’autres termes, la demande globale devrait être positive, avec des pays comme l’Inde et la Chine, qui ont de plus en plus d’argent. Cependant, au niveau industriel, l’utilisation très pointue reste chère avec cette matière et ils essaient de trouver d’autres matières moins chères et substituables ». ‐ 22 ‐ ¾ Etudiants HEG : « Que pourriez‐vous nous dire au sujet de la demande d’investissement sur ce marché ? » ¾ M. Von Rohr S. : « On s’aperçoit de plus en plus, que l’or intéresse à nouveau les investisseurs, de par ses caractéristiques dites de valeurs de refuges. On voit notamment de plus en plus de portefeuilles diversifiés en or et on voit même parfois des clients qui souhaitent obtenir des lingots, voire des pièces de manière physique. » ¾ Etudiants HEG : « Quels sont les principaux acteurs du marché de l’or ? » ¾ M. Von Rohr S. : «Il y a les banques centrales qui possèdent d’énormes quantités d’or, les investisseurs qui spéculent sur cette matière première, les intermédiaires (négociants) comme les banques de Londres et de Zurich qui effectuent des volumes importants sur le marché de l’or. De plus, il ne faut pas oublier, les producteurs, comme les mines d’or, etc. Concernant les producteurs, il existe également différentes façons d’extraire l’or et cela ne coûte pas la même chose. A titre d’exemple, lorsque le prix de l’or avoisinait les USD 200.‐, pour certains producteurs, le prix n’était pas assez élevé et la marge était quasiment inexistante, contrairement à aujourd’hui, où les coûts sont largement amortis, avec un prix de l’once d’or qui dépasse les USD 700.‐. De plus, les producteurs établissent des contrats à termes (de 6 à 9 mois) sur l’or qui n’a même pas encore été extrait, dans le but d’assurer leurs prix, et tout cela fait « évoluer » les prix ». ¾ Etudiants HEG : « D’après votre expérience sur un tel marché, quel est le potentiel d’avenir d’un métal précieux commet l’or ? » ¾ M. Von Rohr S. : « L’or en soi est devenu très attractif, car ce métal précieux « garde » sa valeur et surtout dans des périodes de conflits ou de guerre. C’est la valeur de refuge par excellence. Il y a régulièrement des clients qui achètent ou vendent de l’or à la caisse de manière physique. De plus, on peut acheter des titres sur les mines d’or et notamment en achetant des fonds de placements qui sont diversifiés sur plusieurs producteurs. Il y a également toute une gamme de produits structurés dans les métaux précieux. ‐ 23 ‐ En d’autres termes, les prévisions sur le moyen et long terme devraient rester positive et le prix de l’once d’or devrait rester au‐dessus des USD 700 / once d’ici à 2007‐2008 ». Lars‐Erik WAND, Nicolas WYDLER, Michel PIKHANOV, Grégoire AUBARET The Short and long term consequences of current wheat & oil prices Ces questions ont été posées à des personnes dont un ex‐trader (Samir Zreikat) et à un gestionnaire de fortune anciennement trader chez Tradigra et Cargill (German Wand). Ce qui suis et une synthèse des réponses reçues par ces deux personnes. Impacts sur les pays producteurs ? Enrichissement. Exemple des pays de l’OPEP avec la hausse des prix du pétrole, ces pays peuvent réinvestir leurs bénéfices dans une forte diversification, par exemple Dubaï avec le tourisme afin de ne plus dépendre que du pétrole et de s’assurer une survie et une source de revenus en cas de crise pétrolière. Ces réinvestissements peuvent être aussi affectés à de nouvelles infrastructures plus modernes et au shipping (transport maritime). Ces prix en hausse ont comme autre conséquence, une augmentation des rentrées de devises et une hausse des réserves monétaires. Un pays producteur de pétrole est souvent demandeur de céréales. Une hausse du prix du carburant augmente le coût de production/récolte/transport des céréales, et donc leur prix. Mais la marge des producteurs est actuellement telle, qu’ils peuvent financer ces importations. L’impact sera donc plutôt du côté des pays producteurs qui sont soit des pays émergents soit des pays industrialisés. Impact sur les pays importateurs ? • Pays émergents: Pour les pays émergents, la situation sera pour eux catastrophique car on pénalise l’outil économique (lié au prix de l’énergie) et social (besoin des produits de premières nécessités et/ou de fourrages). Bref, vaste sujet… ‐ 24 ‐ Cela provoque donc une hausse du coût de la vie (inflation) baisse du pouvoir d’achat des consommateurs et alimente la spéculation (marché à terme, effet de levier…) • Pays développés : Sur un point de vue macro‐économique, les prix hauts en général des matières premières vont motiver un resserrement de la politique monétaire pouvant se traduire par une hausse des taux. Avec la baisse générale du pouvoir d’achat du à ces prix, il risque, sur le long terme, d’y avoir une augmentation du taux de chômage et donc une baisse des rentrées fiscales pour les États. Sur un point de vue boursier, elle provoquera un fort risque de baisse de rentabilité des entreprises et donc une baisse des bourses probable. Cela aura pour conséquence directe une restructuration. C'est‐à‐dire, une rationalisation afin d’augmenter la productivité et maintenir la rentabilité. Sur le long terme, ces hausses provoqueront une marche en avant dans la recherche de solutions alternatives (recherche et développement). Développement de terrains agricole (augmentation de surface) hausse de l’utilisation des produits phytosanitaires (engrais, souffre…) ‐ 25 ‐ Interview Hänni Florian Haener Michel Oberson Romain Company’s History & Figures: Givaudan is one of the most respected companies in the fragrance and flavour industry. Its rich heritage dates back to 1796, making it the first company to establish itself as a creator of tastes and scents. In 2006, the company achieved sales of CHF 2.9 billion with a workforce of almost 6,000 and a presence in over 100 countries. Headquarters Vernier, Switzerland Founded in 1796 Traded on virt‐x Ticker symbol 1064593 (GIVN) Sales 4,248 million CHF in 2006 (combined pro‐forma figures Givaudan and Quest Intl.) World market share approximately 25% Number of employees approximately 9,300 Number of countries with subsidiaries 46 Number of global creation centres Flavour Creation Centres: 39 Fragrance Creation Centres: 23 Introduction: ‐ 26 ‐ This interview was done in the multinational called Givaudan. This company is located in Vernier (Geneva), where there is also the Headquarters of the company. Our desire was to show another face of the trade of commodities, in other words, to see the category of customer (multinationals) which is involved with trade companies. The person that we interview is the purchasing coordinator. His name is Johannes Rogaar. For this report, we couldn’t write about all information we received. The reason is the confidentiality. INTERVIEW 1) How many people are working in the purchasing department? There are about 130/140 people who are working in the purchasing department. You can see here below, an organizational chart of the purchasing department for Flavours and Fragrances. As you can see, the main activities are separate in order to optimize the organization. Head of Purchasing Purchasing Strategic Support Category Leader Synthetics Category Leader Natural Commodities Category Leader Natural Specialities Category Leader Indirect Materials & Services Sites Purchasing Coordinator 2) Do you have a process concerning the whole of activities for the purchase of commodities? Yes, we have a process but I can’t tell you anything about that, it’s secret. But what I can tell you is that we have one strategy for each commodity (or sometimes per category of commodity). 3) What kind of commodities do you purchase? There are thousands of commodities that Givaudan buys. They can be synthetics or Natural. Per example, for the Flavours, it can be strawberry, Vanilla, Coco nuts, Menthe, etc. and for Fragrances there are “Essence de rose”, Vanilla 4) Can you tell me, which quantity do you buy per year (about); or the amount of money; and also the origin of these commodities? (Graph) ‐ 27 ‐ I can’t give you graphs or figures, but I can tell you that the amount is enormous. The commodities come from the entire world. For example, last year we were buying a specific commodity in china. But now, China changed his fiscal rules. This event can change our strategy. In our case, China couldn’t be as profitable as before compared with other competitors. If India’ society can sale the same commodity with a better price, we would change our suppliers. Of course, the quality must be not decrease. So, due to a change of environmental context, we have to change our strategy. 5) What are the most important for Givaudan the Price or the quality? And when you purchase commodities do you have a Floor price/Maximum price? Quality is the most important thing. The quality is fixed by leading experts for Givaudan. When this quality is established, we compare the price for the final choice. We don’t have any floor price or maximum price. The reason is again the quality. 6) Do the competitors have an influence when you want to purchase commodities? Yes, they have an influence. We consider two kinds of competitors: First of all, there are the direct competitors which are for example IFF, Firmenich. Secondly they are the indirect ones like Procter & Gamble, Coca‐Cola. It happens that different company needs the same commodities at the same time. If we want to buy a commodity which is also purchasing by Coca‐Cola, our power of negotiation is less powerful than its. Coca‐Cola is bigger than us. 7) Do you have any agreements with external companies or not? (Trade of commodities) Yes, there are. But it depends of the kind of commodities. If we find a trade company which is working especially with one sort of raw material, we could make an agreement with them or we can also have a global contract for many different commodities. Sometimes, we buy directly to the producer. It depends on the context. ‐ 28 ‐ ‐ 29 ‐ Stéphanie Reber, Romain Vaucher ‐ 30 ‐ Octobre 2007