That peculiar and endearing creature, the hedgehog, is today, believe it or not, an endangered species. And, in financial terms, our Association, the MMTA, if we are not careful, could well become so too.
How, in our mercantile world, it may well be asked, can a commercial organization possibly continue to thrive when it is designed not to make a profit? How do you bring together a group of companies whose occupations are so diverse as to include everything from Cobalt to Calcium, Tantalum to Thallium, Bismuth to Beryllium? How do you get them all in one room?
The answer is much like the hedgehog – difficult to describe sensibly, if you don’t know what one is.
The hedgehog-ness of the MMTA mainly centres, to my mind, on the spines as the key metaphor – courage to put up our spines on behalf of our community to repel the invader.
We had an invader moment in 2010 when the LME wanted to colonise us – as we now know in hindsight – so as to enhance the LMEs future saleable value. Now sold to the Chinese-owned Hong Kong Exchanges & Clearing (HKEx), on July 24th 2012, our minor metal world could have been wrapped into the LMEs big game plan and our fortunes for ever after determined by outside forces. Had the association not voted so conclusively to walk away from the LME-promoted ‘Open Price Discovery System’ (OPDS), we might not now be talking about an industry-run Association at all, but something policed by bureaucrats somewhere in the Far East. The two minor metals that sneaked out – partially at least – Molybdenum and Cobalt – have not prospered as LME metals.
When it came recently to the matter of the ‘independence of warehouses’, a matter that has engulfed the LME base metals market in potential scandal, the MMTA was clear – under ‘Rule A/Warehouse Criteria’, we state: “The company shall be neutral, not owned or associated with any Trading Company”. The purpose of this rule was not high-minded prudishness – it was rather one of the keys to minor metals liquidity. The key separation of functions, meaning that the warehouseman’s job could not conflict with that of the trader or end user. It meant that competing minor metals companies could store their high value metals within yards of each other but never know anything about what their competitors might be doing. It has allowed the warehouses to provide prompt service which can at times include 24 hours delivery. It has meant that the warehouseman has no interest in the outcome of price. (Of course, as anyone who has read the financial press recently will know, none of this can be said of the LME where, despite 5mln tons of Aluminium on warrant in LME-approved warehouses, because of cross-ownership, it may take 12 months to obtain delivery and prompt aluminium today despite a fundamental supply surplus can command a US$250 per mt premium!
Our spines, meaning our rather independent-minded members, didn’t feel like merging into a larger organization run by outside executives in the above way but chose to continue with our well-founded systems and principles as well as the method of electing our own to give up time to run the organization, unpaid, with the key assistance of two excellent full- time executives.
Our spines include also one of our longest serving members, Howard Masters, of Lambert Metals International Ltd., who as Chairman for 14 years staved off creeping corporatism and guided the MMTA on its idiosyncratic path. Combative, but clear-sighted as he is, he above all ensured that a predominance of owner-occupied companies would be at the core of what the association does, rather than bland hierarchical corporations.
So what is it all for? As regards minor metals, in their great diversity of uses, forms, volumes, origins, prices, they simply do not lend themselves to formulaic trading or – mercifully – algorithmic trades, Exchange Traded Funds (ETFs) and Hedge Funds. Being independent has allowed us to run the business that we, perhaps arrogantly, think we know a little bit about. At the same time, we have so far avoided the interference of the Financial Services Authority (FSA) as we do not face investors. While, as individual companies, we of course seek profit through our various specialisms, when we come together we are ‘non profit-making’ and work for the good of the community as a whole. It is almost a paradigm for life itself and long may it last.
However, all the same, the hedgehog of today needs all the help it can get. The main financial highways are fearful places, full of speeding irresponsible traffic, and our habitat is becoming ever more circumscribed. To ensure survival in this financial landscape we need a continuous flow of members to come forward and serve on our committees and give of their time and skills.
Some may call it altruism. However, I would like to suggest that ‘enlightened self-interest’ might be a better expression. In fact, if we do not continue collectively to put in the personal effort to ensure the health of the MMTA, there is a very real danger that we, and those around us, will simply get squashed.
It is perhaps worth thinking about next time you see a hedgehog by the side of the road.