Swiss Shock Means Patriotic Trader Looks Elsewhere to Hire Staff
(Bloomberg) — Mercuria Energy Group Ltd. is among Swiss commodity traders considering expansion elsewhere after the central bank shocked markets by ending a cap on the currency.
“We have to constantly consider, to remain competitive, where to add jobs and where to replace them,” co-founder Marco Dunand said in an interview. “I would be surprised if we increased the amount of employees we have in Switzerland.”
Mercuria, which has its largest trading operation in Geneva, is growing faster than peers, with an $800 million deal to buy parts of JPMorgan Chase & Co.’s physical commodity trading unit last year and a global staff totaling about 1,300.
The Swiss National Bank’s decision to stop intervening in the currency markets, resulting in the franc jumping more than 20 percent against the euro, raises costs for the world’s fourth-largest independent oil trader by about $10 million a year, according Dunand, a former Goldman Sachs & Co. trader whose ancestors lived in the Geneva area since the early 1400s.
Switzerland’s commodity trading industry, generating about 20 billion francs ($23 billion) a year or about 3.5 percent of the economy, was sideswiped by the central bank. The higher franc raises costs for firms including Barr-based Glencore Plc, as well as the Geneva operations of Gunvor Group, Trafigura Beheer BV and Vitol Group, the world’s biggest oil trader.
Stable Country
The appreciation adds to concerns including a proposed hike in corporate tax rates for trading firms in Geneva and a Swiss referendum vote to cap immigration that may make it harder to hire foreign staff.
“Considering it is a very stable country there are big issues which need to be solved in the next few months,” said Dunand, also Mercuria’s chief executive officer, in an interview at the annual World Economic Forum in Davos, Switzerland.
Mercuria, which posted 2013 net income of $273 million on revenue of $112 billion, expanded its Houston office to about 180 staff from 80 after the JPMorgan deal as it added gas and power trading operations in North America and Europe. It hired more than 40 marine-fuel traders in December.
Switzerland is home to about 5,000 companies linked to the commodity industry employing 10,000 to 12,000 people, according to the Swiss Trading and Shipping Association lobby. Companies that trade oil, metals and agricultural products have benefited from low taxes, access to trade finance and light regulation.
Heavier Burden
The government said last year it wouldn’t force commodity trading firms to disclose payments made to foreign governments unless the U.S. and European Union imposed the same rules.
That hasn’t stopped traders voicing concern about change.
The “regulatory burden is getting heavier,” Vitol’s managing director for Switzerland, David Fransen, said in a Jan. 19 report in L’Agefi. Vitol wouldn’t want to see a combination of factors that included a stronger franc and rising taxes make the situation in Switzerland “untenable,” he said.
Vitol has no plans to leave Switzerland, Fransen said.
The effect on commodity traders of the franc’s appreciation will be limited as most contracts are in dollars, though those in other currencies are growing, said Philip Prowse, a partner at Clyde & Co., a law firm advising the industry.
Mercuria’s Geneva operation, with about 200 employees, is still the largest of its more than 35 offices in 27 nations even after the company’s international expansion.
“We are Swiss patriots and we love living here,” Dunand said.
–With assistance from Giles Broom in Geneva.
To contact the reporters on this story: Andy Hoffman in Geneva at ahoffman31@bloomberg.net; Zoe Schneeweiss in Davos at zschneeweiss@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Dylan Griffiths
