A Young Person's Guide to Metals Trading

Part 2: The reading list

Perhaps it’s not surprising that an industry of few words, has even fewer written about it. I refer to text books of instruction rather than comment (of which there is plenty). This vacuum presents a problem to the young, for where can a young person turn to learn about trading minor metals?

When asked this by a trainee the first thing I usually recommend is to take a look at the Minor Metals Trade Association’s website www.mmta.co.uk It's not a bad start – there the student of metals will find specifications of our traded elements, rules on warehousing and contracts, and a smattering of principles - such as the requirement for members to be in involved with the physical trade in minor metals (not mere financial investors).

I suggest they look at the LME website www.lme.com too because it’s useful to have a notion of what a terminal market is, and how our minor metals market is different. The truth is that there's reams of literature out there on subjects stretching from minerology to scandal, but not enough about the humdrum details of how markets work.

One of my favourite metal books of all time, which mixes both history and mechanisms, is Bob Gibson-Jarvie’s, The London Metal Exchange (1976), now out of print. Despite the fact its content has been superseded by complex financial wizardry, blockchain, LME Select, ETFs and a host of online instruments, I recommend it because it gives a baseline. It tells the young person what the LME once did when it was at the exclusive service of the metals industry - before banks and hedge funds made it their plaything.

Perhaps another reason I like it, is that I remember Bob writing in our office. He was a great friend of my first boss, Mick Brackenbury. Our office was just opposite The Old Billingsgate Fish Market at the bottom of St Mary at Hill and Upper Thames Street on the ground floor of a converted Post Office. In the early morning the whiff of fish down Monument Street was powerful, and the porters still carried fish boxes on their heads perched on great flat solid leather hats. Our office was like an annexe to old London, as Mick collected friends and acquaintances from his past who sat in our office rent free; either to trade or, in Bob’s case, to write. Bob was there because he had pulled Mick from a burning racing car at Brooklands and could do no wrong. It was before the formation of the International Commodity Exchange (ICE) for which Bob wrote the rules. As we neophytes worked away hammering the phones to get trade, Bob puffed away at his pipe on an old typewriter behind me, and in an avuncular way filled the role of benign office guardian angel. He had come from a wealthy family who had run United Dominion Trust later to merge with Trustees Savings Bank, later taken over by Lloyds, and then demerged as TSB. Such is The City! Apart from Bob there was of course always the rat catcher, who visited so often we barely looked up from our desk. We just gave him a cheery wave as he descended to the basement. In Somerset, where I live now, we call rats ‘long tails’ which is what people in Somerset probably call metal traders.

But I digress – books you might read later about scandals, such as the ones in The World for Sale (2020) by Javier Blas and Jack Farchy, are inappropriate for someone starting out. What’s needed early on are the mechanics with a bit of history into the mix; based on the fact that anything that will happen already has. My favourites of this type are the evergreen Wolff’s Guide to The London Metal Exchange (1987) and/or Guide to Non-Ferrous Metals and their Markets (1979) and Guide to Precious Metals and their Markets (also 1979) by Peter Robbins and Douglass Lee.

If this doesn’t work, the only other answer is to get a decent boss, one that can spare the time to sit with the student metal trader and go through the concepts one by one – contango, backwardation, spreads, arbitrage, the difference between ‘Terms’ and ‘Conditions’ (terms on the back and conditions on the front of a contract) letters of credit, Incoterms (international shipping terms issued by the International Chamber of Commerce), how to use supply and demand charts to gain perspective and much more, but always leavened with examples and anecdote.

Come to think of it…why don’t I just write one?