Where would you rather be working – Marble Bar, the Tanami Desert or Geneva?
Before you answer, I can tell you that Geneva is a great city. There are cafes everywhere (even serving absinthe if you’ve had enough Emu Export for the day), the food is great, the transport system almost perfect (trolley buses and trams go almost everywhere) and, if you want to take off for the weekend, you don’t have to drive a few hundred kilometres in 35C.
Instead, a gentle saunter down to Geneva-Cornavin railway station will allow you to catch the 5.45pm train which will have you alighting at Gare Lyon in Paris just over four hours later.
And if you find living in Geneva itself a tad expensive, as many do, you can rent a cheaper flat in France, which is just 10km away (served by bus and ferry services) in towns such as Evian-les-Bains or Ferney-Voltaire.
You see, that’s the sort of life you lead as a commodities trader in Geneva. You might prefer Zug or Lugano, the other two main commodity trading centres. They have their own individual attractions.
There are 500 commodity trading companies in Switzerland, and they add 20 billion Swiss francs a year to the national economy. The Australian dollar is almost on par, so that’s $20 billion in our currency too, give or take.
A joint report out this week from the Swiss foreign affairs, finance and economic affairs departments provides an update on the regulation of commodity trading (financial, money laundering, observing sanctions, etc.) which we won’t bother about here. But it does show just how important a business this is for Switzerland.
And its a reminder on how we keep missing out on the value-adding to minerals – where the real money is made. Set aside the few global-sized operations we have and Australia is in the wrong end of the commodities business.
Hundreds of juniors scratching a living, year after year of chasing the elusive dream of getting a mine into operation, you know the drill.
We’re mugs really. It’s not just the Swiss who earn big bucks from - essentially- shuffling paper and money rather than getting their hands dirty. Singapore, Dubai, Hong Kong, the Netherlands, New York and London are all places where flicking a consignment of oil, cocoa or copper to a buyer is a hard as the yakka gets.
Remember that idea of making Australia an international financial centre? Sydney was going to be the banker to the region. In the end, we couldn’t get out of our own way.
When it comes to building a financial superstructure on top of our mining and energy interests, we haven’t much to show for it beyond the Perth Mint.
And the Swiss have managed all that without having any minerals of their own to speak of. According to the US Geological Survey, the reserves of metalliferrous ore that once existed in Switzerland have been depleted.
While the vaults of banks there are no doubt brimming with gold, the country has never mined the yellow metal. Not only does it have the commodity trading business, Switzerland has made money from processing other people’s metals.
Novelis Switzerland was a world leader in the production of aluminium-rolled products, Schmelzmetall was a leading manufacturer of copper-based alloys, there have been several substantial gold refineries, and there was also an industry processing scrap steel.
Commodity trading in Switzerland goes back to the 18th century. Xstrata derives from Sudelektra AG, founded in 1926. Glencore is a more recent creation: in 1974 US financier Marc Rich founded a trading company under his own name and it was given its present name when Rich left in 1994.
As the government report shows, one of the largest oil trading companies in the world, Mercuria, was formed just nine years ago.
Of course, we must add that the commodity trading includes a good deal more than metals; they trade oil, grains, sugar and coffee. But Switzerland still controls 60% of world metal trading, with Singapore/Shanghai accounting for 20% and London 10%.
It’s a level of financial sophistication which has eluded Australia. Yet, along with Canada, of all the mineral producing exporters of the world, we have the potential to take our mining sector to another level. Yet we haven’t.
And Switzerland has another advantage: its government is not dedicated to taxing enterprise to death.
