Geneva, 12 May 2010

Physical commodity traders who have quietly made billions brokering oil, grains and metals shipments worldwide are beginning to yield to pressure to be more open about the way they work. Privately-held firms such as Cargill, Vitol, Mercuria and Gunvor have long kept a low profile in Switzerland, a major hub for commodity trading despite being better-known for its banks and luxury goods.

But this year, to the surprise of many, several Swiss-based trading houses have issued press releases announcing their 2009 revenue and trade volume figures and have been increasingly open to engaging with the press.

• Privately-held firms long reticent to expose finances

• Regulators, investors press for more commodity openness

• Glencore IPO seen changing expectations for transparency

Industry experts and executives said the shift towards more openness was the result of increased attention from regulators and investors in physical commodities, as well as a desire to create a better understanding of the industry.

"Our media strategy used to be 'no comment,'" Trafigura Director Pierre Lorinet told Reuters in Geneva. "Our growing economic role around the world is too important today not to engage, not to have a public image."

Unlike futures traders who speculate on paper, physical commodities traders typically charter vessels to deliver goods around the world, hedging against price volatility and other risks as materials move between mines, rigs, refineries and storage facilities.

Communications strategists say it is important for the brokers to explain those operations, which have traditionally taken place outside the public purview, to reduce reputational risks from any accident involving their goods.

Patrick Prendergast, spokesman for the oil and energy trader Mercuria, whose 2008 turnover was $47 billion, said his company had made a conscious decision to make itself more accessible.

"We prefer to engage with the media to be available and try to be helpful. We always wish to have the facts as clear as possible," he said. "We feel our employees and customers value this, that we engage actively and are willing to share news and talk about what we are doing."

Glencore IPO Impact

One public relations executive said the dissolution of Swiss banking secrecy, following U.S. pressure on UBS, also had implications for the traders who need financing and letters of credit to arrange their deliveries of raw materials.

"There has been change over the past probably two years with everyone wanting to communicate a bit more," said the executive who represents Swiss trading companies. "It's just a general trend amongst all industries for more transparency and openness."

The metals giant Glencore reported 2009 turnover of $106.4 billion amid widespread speculation it would launch an initial public offering. Vitol said its 2009 revenues were $143 billion and Gunvor said its turnover last year was $50 billion.

A Glencore IPO would very likely shift the expectations of transparency on the company's privately-held peers, compelling them to continue to release top-line figures to show they are keeping pace in the market, according to industry experts.

"I am assuming it would change the benchmark. It is bound to happen," one communications professional said.

But many commodity traders and shipping firms based in Switzerland remain media-shy, declining press interview requests and preferring to keep their cards close to their chests.

"The fact is that most trading houses are secretive about their business," one trading executive said, speaking on the condition of anonymity. "Because the business is so competitive, trading houses are deeply sensitive about business information."

Travis Randolph, a partner at PriceWaterhouseCoopers in Geneva, whose clients include a number of commodity traders, said he believed that big trading firms would continue to guard most of their proprietary information.

"I don't think it will ever be an industry that is fully open such as a publicly traded company. There is no legal requisite per se to give any transparency on the financial figures," he told Reuters.

One of the biggest concerns traders have about sharing their balance sheets, Randolph said, is that rival firms will use the information to discern how much money is made by traders in demand. "The remuneration of traders is one of the most closely-held secrets of any shop."

Ends --

By Laura MacInnis, Reuters, (Additional reporting by Martin de Sa'Pinto in Zurich; editing by Jonathan Lynn and James Jukwey)