When it comes to commodity traders' compensation, this year's governing principe is, live by the sword, die by the sword.
The most successful traders of energy and precious metals who earned $5 million - $8 million total compensation in 2007 are expected to make just $1.0 million - $1.5 million this year, a decline of 80 percent, Bloomberg News reports, citing estimates by London headhunter Kennedy Associates. About 5,000 people trade commodities at banks, brokerages, trading companies and hedge funds, the recruiting firm says.
A growing number of energy traders are leaving the finance sector for safer positions in utilities, power producers and independent niche trading firms. "For the first time in the past five years utilities and producers are seen as the best career options due to their commitment to the markets coupled with the more aggressive compensation structures that they have adopted," commodities recruiting consultant Elliot Pickering of London-based Human Capital Search told Bloomberg.
The traders' reversal of fortune mirrors an abrupt and dramatic reversal in the prices of goods they trade. After a seven-year bull market that saw gold breach $1,000 an ounce and crude oil post record highs above $147 a barrel earlier this year, energy and metals tumbled in the second half as the world sank into recession. Crude oil currently trades at three-year lows, commodity indexes are 35 percent lower year-to-date and copper futures are 48 percent lower.
Utilities Hiring Traders Away From Banks
That's roiling traders' job prospects as much as their pay prospects. Hiring by bank commodities desks "has moved from a frenzy to nigh on dormant," Shaun Springer, chief executive officer of Napier Scott Executive Search Ltd., told Bloomberg. UBS is exiting over-the-counter trading in industrial metals and energy, while commodities desks weren't spared in Goldman Sachs' 10 percent worldwide staff reduction last month.
Meanwhile, the article cites hires from banks by Dutch utility Nuon NV, Swiss utility Energie Ouest Suisse, German utility RWE, Abu Dhabi state renewable-fuels company Masdar and Amsterdam-based Trafigura Beheer BV, the world's third-largest independent oil trader. German power producer E.ON also says it's getting applications from bank traders.
Citing UK recruiter Global Resource Solutions Group Ltd., the article says annual salaries for "middle-ranking trading staff" at energy companies average about 90,000 pounds ($133,000), with senior positions commanding 380,000 pounds. Banks still pay more, but in the past year the gap has narrowed to 7 percent from 18 percent, according to Global Resource Solutions.