Tristan Busch, Zopco SA
“Seems easy enough – you just pick it up from the producer and deliver it to the customer” – something we often hear when we try to explain our company’s activities to persons not familiar with commodity trading.
If only it was that simple. Moving product from point of origin to point of consumption can be a complex, multi-modal process and the path a product takes to market can alter frequently over time. Any commercially minded entity will seek to optimise the flow of goods to reduce logistical and financial costs whilst still getting the product safely and responsibly to its end home.
The more remote the goods’ origin the more variables need to be considered, 1) the cost of inland transportation from the mine to the port, 2) the cost of handling goods onto vessel, 3) the time goods take to reach the port, 4) vessel availability, 5) the cost of ocean freight and marine voyage time and 6) the presence of reliable inspection companies.
Much of what we source comes from Southern Africa – Zambia, DRC, and Zimbabwe and there are several potential paths goods can take to market. Over the last years, we have exported through Walvis Bay, Durban, Richard’s Bay, Beira, Maputo, and Dar es Salaam. Our decision on which way to go is determined by evaluating the above factors.
Dealing with smaller-scale producers adds another degree of complexity. These guys have unpredictable production volumes and are easily impacted by the availability of raw materials, electricity, and fuel required for beneficiation. And since we aggregate materials from several small plants into single, larger parcels to meet international market norms we further increase the complexity.
What worked yesterday may not work tomorrow as new shocks to the system are inevitable. We have seen floods, country borders closing, container lines skipping ports, blockages in the Suez, rockets in the Red Sea, and seasonal agricultural flows tying up capacity to name just a few.
We are just one of many moving goods along similar routes, and the optimisation made by our peers can ripple through our decision process. Not that metals traders are sheep and follow each other blindly, but we often have the same ‘bright idea’ at the same time, shifting goods through different ports and these shifts can create their own bottlenecks. The influence of other traders’ flows also needs to be considered.
The prices for many metals are high, interest rates remain elevated, so time is increasingly a key factor. There is little point in saving a handful of dollars on a logistical flow if it adds several weeks to the journey. Any profit from a trade can be preserved or lost depending on how well we optimise.
There are several ways to get it wrong but only a few to get it right. We feel a tremendous sense of accomplishment when we execute a delivery successfully, safely, and responsibly. In so doing we navigate the multiple challenges the region offers, and along the way have helped fuel the local economies from which the goods originate.