Alex Brummer

INVESTMENT SPECIAL: Nature’s risks and rewards

A beginner’s guide to investing in commodities

issue 21 May 2011

A beginner’s guide to investing in commodities

The arrival on the London Stock Exchange of the Swiss-based mining and commodities behemoth Glencore, valued at £40 billion, has provided a rare insight into the mysteries of the natural resources world.

This remains a relatively little understood sector even though the first commodities trades can be traced back to biblical times (there are whole Talmudic tractates on the subject) and the modern world of trading financial futures owes its origins to pork- belly and corn trading at the Chicago Board of Trade.

What we have learned from Glencore’s initial public offering is that many transactions in physical commodities, natural resources and precious metals take place away from recognised exchanges, and involve traders taking controlling positions. Disclosures in Glencore’s prospectus revealed for the first time what a dominant player this hitherto very private company is in vital metals — with a global share of 60 per cent in zinc trading, 50 per cent in copper and 45 per cent in lead.

Comments

Join the debate for just $5 for 3 months

Be part of the conversation with other Spectator readers by getting your first three months for $5.

Already a subscriber? Log in