Base metals house of the year: Marex

Energy Risk Awards 2023: Firm provides much-needed liquidity and credit to base metals markets during extreme turmoil

Simon van den Born, Marex
Simon van den Born, Marex

In a year of turbulence that included the Nickel crisis, Russia’s invasion of Ukraine and huge macroeconomic volatility, Marex remained active throughout, providing base metals markets with much-needed liquidity and clients with vital credit to manage their metals exposures.

While other hedge providers withdrew from the market last year, Marex, winner of Energy Risk’s 2023 Base metals house of the year award, expanded its market reach, facilitating significant hedging programmes in copper and aluminium markets, issuing the first carbon neutral aluminium product and registering the best year for Marex’s metals desk in its 30-year history.

The firm, which operates as both a matching broker and a trade-executing dealer, also acquired ED&F Capital Markets, expanded into South Korea, grew its environmental, social and governance initiatives and established a working group focused on battery and renewable energy metals.

“Despite the high interest rate environment and financial institutions pulling back, we continued to expand last year, growing Marex’s own extension of credit to corporate hedgers by 100% due to expansion into South Korea and corporate counterparty growth,” says Simon van den Born, president, Marex.

Marex’s metals team consists of over 80 people covering non-ferrous, ferrous, precious and recycled metals. It also runs a liquidity platform, bespoke algorithmic execution and a clearing service.

Technology is integral to the Marex metals franchise, with their Neon platform, a digital gateway for 10,000 clients to access market commentary, trading and risk services across the trade lifecycle. This includes Neon Metals, a liquidity platform for clients looking to trade outright and carries, as well as online request for quotes in CME aluminium.

As a result of market trends and client needs, Marex has also entered a commercial partnership with the CME Group to jointly develop its CME aluminum futures contract.

Marex’s success in 2022 was underpinned by its robust approach to risk management and modelling, which enabled it to be ready for the series of market shocks that followed, it says. For example, at the first signs of increased tension between Russia and Ukraine in late 2021, Marex ramped up its analysis and stress-testing.

In base metals markets, each underlying was addressed individually. The firm modelled “unprecedented” stresses on all impacted positions, taking appropriate steps, such as scrutinising limits and portfolio concentration exposures, to ensure that Marex could continue providing markets with liquidity and clients with credit.

“It was essential that our own and our clients’ exposures to Russian sanctioned companies and individuals were understood, communicated and appropriately managed and we did this by taking a holistic view of businesses, and first and second lines of defence, across risk, treasury, compliance and financial crime,” says Christian Lusted, head of sales, metals, at Marex.

This approach also helped Marex weather the Nickel crisis on March 8, 2022, when the price of nickel rose 100% to $100,000 a tonne in a matter of hours, triggering massive spikes in margin calls and causing the LME to halt nickel trading.

“During the Nickel crisis we continued to satisfy all external margin requirements despite at times not having received margin from our clients,” adds Lusted. “These challenges were overcome through well-managed internal policies and procedures and our long-term approach to our clients and the business.”

Marex’s reliability and deep market insight is appreciated by its clients. “Everyone can tell you the high, low, range and volume figures, but Marex offers you cross-correlative interpretations that ensure you have the best tools to manage risk in these ever-evolving markets,” says a commodities fund manager.

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