Talking to old metal boys about deals of the past is just a happy pastime for me – and I have come to notice a few trends. No matter the age of retiree, whether a sprightly 70 or 90, the yarns come down to the people. Talking with an old hand from the tungsten trade recently, the subject of Simon Hicks came up.
For a younger generation of merchants the name will mean absolutely nothing; that is, unless they have been lucky enough to read Chapter 11 of Trevor Tarring’s book ‘Corner!’ [Published by Metal Bulletin Books, 1997].
Hicks was a racehorse-loving public school boy who married the boss’s daughter at the then well-established LME ring dealer, Metal Traders Ltd., and caused several fits in the world of tungsten in the 1960s, ending with Metal Traders’ collapse on March 16th 1972.
His name came up because BBC 4 recently put out an excellent programme entitled The Secrets of the Super Elements, focusing on a number of exotic metals – indium, rhenium and lithium – but also featuring tungsten carbide and Britain’s new tungsten mine at Hemerdon, near Plymouth.
Someone writing in to the programme makers, while re-hashing the geopolitical background to the tungsten market of the 1960s, went on to allege Byzantine grades of collusion between Hicks and the banks, while also suggesting, darkly, the involvement of British secret services.
Conspiracy theories aside, there is one sense in which tungsten and the secret services were yoked together like cheese and pickle. Both the Second World War, and the First, as Tarring put it to me in a recent phone call, ‘consisted of the two sides hurling tungsten at each other’. And it is also true that in the Second World War the competition between the Allies and the Germans to secure tungsten was directed by the Ministry of Supply through a low profile entity discreetly called the United Kingdom Commercial Corporation (UKCC). It may not have been as courageous as SOE operations but was highly important to Britain’s war effort.
So, could the theorist be right? Why shouldn’t the close relationship between the authorities and supply of strategic metals have drifted on into the 1960s when Sergeant Pepper taught the band to play?
Sir Alfred Chester Beatty, who had done so much to assist the UK Government in the First War with fellow mining engineer, Herbert Hoover (later to become President of the United States), was the man behind the covert purchasing operation. These activities centred on Portugal, with both sides converging on the Beralt mine at Panasqueira which had been managed by British Metal Corporation before it was sequestered by the Portuguese Government. As the war progressed, orders came in from the Ministry of Supply to ‘buy as much wolfram as possible, regardless of cost’.* Without the newly commercialised product of tungsten carbide for dies, hi-speed steels, cutting tools, tank armour-plating and shells the war could have been lost in the foundry, never mind in the air or on the sea. Competition with Germany for supply was so great, that prices rose from pre-war £150 per long ton of WO3 to £6000. So valuable had tungsten become that the locals were panning for it.
All this sounds like grist for an Eric Ambler novel involving paranoia and hidden forces at play across Central, Eastern and Western Europe in the late 1930s. But, from what I have read and heard, the Hicks of the 1960s was more of a John le Carré character, a man at the centre of events but loaded down with flaws, foibles and arrogance like a mule. The wrong man in the right place and the right time.
As I was not around then, and have no contemporaneous knowledge of the Hicks tungsten scandal, I read Tarring’s account but decided to seek out one or two traders who were involved to try and decipher the metal facts from the myth.
Tarring’s chapter in Corner! gives the context to tungsten’s significance from World War One, through World War Two, the Korean War and into the Cold War. Writing in 1997, on the threshold of the internet age, Tarring referred us back to those 20th Century strategic times when tungsten-containing armour-plating, bullets, missiles and magnetos were critical; but by 1997 you could almost say such materiel was old hat; superseded by Reagan’s Star Wars programme that helped bring down the curtain on the Soviet Union. And today, tungsten-bearing hardware is almost quaint when compared to the damage potential of beardless hackers working from bedrooms in North Korea, China, Ukraine or Surrey.
It was not unusual for a London Metal Exchange ring dealer in the 1960s to be active as a principal in metals other than those brokered through the ring. What Metal Traders Ltd was doing, with Hicks in charge of the tungsten book, was no different in essence to what Philipp Brothers and other merchants of the day sought to do. In their separate ways each profited from the many politically motivated (some would say ‘bonkers’) trade barriers that existed at the time. China then was, and still is, the world’s largest producer of tungsten, and all had been well in terms of sales from China to Russia during the period of the Sino-Soviet pact. The People’s Republic was perfectly content to sell tungsten to Russia as barter for Russian-built factories, aircraft, nuclear power stations and other goods then in deficit in China. But the Sino-Soviet split in 1960, leading up to the time of the Cultural Revolution, changed everything.
In those days of state selling organizations, the Chinese organized sales twice a year for two months at a time at the Canton (Guangzhou) Fair, where their tungsten was bought up by traders such as Derby & Co., Brandeis, Tennants, H.A. Watson, Adam & Harvey, British Metal Corporation and others, sometimes directly but often through their local agents. All these merchants were based in London because the USA had embargoed China and, unlike today, the reach of U.S. law makers did not hold back Europeans from trading with the Eastern Bloc.
Into this mix came Hicks, (‘immortalised’, as Tarring records, by Dr Claude Barbier in his book The Economics of Tungsten, to prevent the possibility of libel, ‘as “Monsieur X”, a pun, as Tarring says, ‘which only works if you pronounce X the French way’.)
The real Hicks was of a type common to the posh set who inhabited the fringes of the LME broking community of the era, for whom speculative trades in copper and zinc on the London Metal Exchange was a form of turbo-charged Ladbrokes. A gambler to the core, metals provided a wider and more exciting canvas than horseflesh. Tarring tells the story of how Hicks bet that the Waterloo-bound train on which Hicks was travelling with a fellow passenger from Hampshire would be delayed, only to pull the communication cord just outside the station when it appeared to be about to arrive on time, in order to take his winnings, deduct the fine, and still come out on top. Similar stories of derring-do circulated about one of my former bosses, Colin Williams, alleged to have entered agreements with fellow London traders at the Canton Fair to low ball the Chinese and go home – only for Colin to make the appearance of joining the departing train with all competitors aboard and at the last moment alight to the platform, in time to wave goodbye and return to the fair and clean up.
Talking to some of the old boys of the period about what really happened with tungsten, I find the Hicks story to be more banal but no less illuminating than the conspiracy theorist would have us believe. Hicks played all the usual games, he made sacrificial trades which he reported to the Metal Bulletin, he bought at fixed prices in Canton after the price had been pushed down and sold forward on formula on rising markets that he could influence by virtue of his control of stock. He worked hand in hand with a consumer in Liverpool who would give consumer credence to the prices thus manufactured and reported. But much of the macro strategy was predicated on China not being able to sell direct to the Soviets. If London could remain the centre for free market transactions in tungsten, then the tungsten-hungry Eastern Europeans would have to come to London for supply.
The problem for Hicks was that he was not the only trader of the era involved with tungsten. Hicks’ demise came about not only as a result of a gamble too far but also by forgetting that customers, even state-owned ones, cannot be disdained. It didn’t help much that he is thought to have rather disliked foreigners, which is not a great asset in a trader, and one person who worked with him, or, rather, on his behalf, Tony Wright, does not recall Hicks visiting China even once. Tony should know, as he was working for J.H. Little, a venerable agency company based in China that Metal Traders used for all their purchases. Nor was Hicks vastly interested in end users and applications. He, therefore, spoke neither German, Russian, Polish or Hungarian, all of which might have been helpful in dealing with the buyers he needed in order to off-set his Chinese purchases. While Hicks was undoubtedly the better gambler, the Jewish and other emigré traders who had set up in London after the war were better chess players. It was this group who gained and received levels of trust from the Soviet and satellite trade organizations, Intrac in East Germany, Metalimex of Rumania, Metalimpex of Hungary, Impexmetal in Poland, and Raznoimport in Moscow. These smaller companies ran tungsten positions too. Unlike Hicks and Metal Traders, their stock was not in excess of the amounts they anticipated selling, and they were not in cahoots with the banks, let alone secret services, in running their position.
In the early 70s, it became apparent that Hicks was overpaying the Chinese, paying prices supported by benchmark quotes reported to the Metal Bulletin that Hicks was the author of. One trader from the era, now in his 90s, told me that at the peak of the madness he was approached by a perplexed trade delegate of the Chinese foreign trade organization, Minmetals, in London, to ask ‘Why is he paying us so much?’
As the price rose to astronomical levels, the inevitable collapse of operations drew nearer. Metal Traders, perhaps like Barings Bank in another era, had been content with the profits coming in from the fringe of their business (the non-LME ops) but without questioning too closely as to its fundamentals. Old Eastern European hands in London, with perhaps less chutzpah, but longer perspectives, than Hicks, were drawn to make sales to their counterparts in the East for the apparently astonishing reason that they wanted to do business – and felt some past and forward loyalty to their buyers.
The conspiracy theorist who wrote in to the BBC alleged that Hicks’ purchases were part of a scheme to deny Russia tungsten in some kind of Cold War gambit which would today more likely be expressed via hacking. Insofar as the public school boy might well have hob-nobbed with our Civil Servants working in the shadows, that is entirely possible. Associations formed in the long room and reaching into the secret services tend to persist. However, whether they did or did not, markets tend not to conform to political agendas; which is something we might be hearing a lot more about as Brexit gets under way. And when it comes down to serving customers by delivering metal, and not hanging out for the highest prices, that is something that neither the Securitate, Mossad, CIA, Stasi, MI6, KGB or any other secret service have much experience in.
In my discussions with those involved, I found no evidence of secret service involvement – but I suppose, if I had, they wouldn’t have been doing a very good job. Having said so, if it turns out that those who had once worked for UKCC sought post war job security by prolonging their tungsten war work into the Cold War era, that is entirely logical. Although none of the contemporaries to the Hicks affair I questioned could shed any light on that, it does not mean that various security services might not have been pulling strings in some extraordinary political game, based on Cold War fears.
But, in metal terms, that they may have been involved is hardly the point of the story. When Metal Traders collapsed, it was because the broking company found out that the off-exchange tungsten being bought by their star employee was not worth what they had been led to believe. There was, and is, no daily tungsten price across the ring that could have transmitted the information. Hicks had just got too big; his positions too long, his hunches too great, his funds too short. He became one in a long line of psychopathic traders – from Pierre Secretan in the 1890s, through to Pieter de Koenig in tin, Bunker Hunt in silver, Hamanaka in copper – to bet the company and lose.
As one metal man mentioned to me dourly about the Hicks heist, ‘No tree grows for ever.’ The question we could well ask now is, ‘Which tree will be next?’ and ‘On which vegetable patch will it grow?’
Cobalt? Lithium? – Look for the signs, and I’ll leave it to you to place your bets.
Published July 26th 2017 on www.lord-copper.com