Special International Manganese Institute report Metalshub

The International Manganese Institute (IMnI) investigated in a special report how Metalshub, a digital trading platform launched recently in Europe, impacts ferro-alloys trading.

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Prepared by: Aloys d’Harambure, IMnI Executive Director Published on February 8, 2018

The ferro-alloys trading business is currently witnessing several major changes, including big data and blockchain technology, new digital trading platforms and futures exchanges for silico-manganese in China. Physical metals trading is becoming increasingly digitized, a process welcomed amid instances of fraud-related activity including fake warehouse receipts in Qingdao, China and a continuing warehouse fraud related to nickel. TradeCloud, set up by two former Trafigura senior executives, recently launched a platform to facilitate deals in the metals industry and is focused initially on copper, aluminium, zinc and nickel. IHS Markit has meanwhile created a system to help physical trading firms to track their metals inventory digitally, replacing laborious manual processes. Aquifer Institute is also launching a blockchain trade financing platform, initially for the six LME-traded base metals, Argus reported. It provides non-bank financing of physical trades on a cargo-by-cargo basis, based on an auction system. IMnI investigates how Metalshub, a digital trading platform launched recently in Europe, impacts ferro-alloys trading.

Metalshub was created by Frank Jackel and Sebastian Kreft, formerly head of ferro-alloys sales and head of nickel sales at Anglo American, respectively. The platform went live in December 2017.

The firm offers a marketplace for the negotiation of deals between counterparties, and other services such as the organisation of logistics, “Know Your Customer” due diligence and credit insurance. It aims to increase efficiency and liquidity in the market and facilitate expansion of users' supplier or customer bases. Metalshub, which is based in Düsseldorf, Germany, is aimed at all market participants and is initially focusing on the European ferro-alloy market, with domestic consumers and international suppliers. But there is scope to expand into other regions and other metals because of its online nature, the firm said. There are no registration or membership fees; sellers pay a fee for a successful transaction.

One of the objectives of the platform is to provide neutral Generals Terms and Conditions (GTCs) for manganese transactions. Kreft told IMnI on February 7. Negotiating GTCs can sometimes be more time consuming than concluding the actual commercial terms of a manganese deal. It regularly happens that contracting counterparties cannot agree upon whose GTCs to use. For this reason, Metalshub has together with specialised legal advisors created neutral General Terms & Conditions that are balanced and fair for both, Sellers and Buyers. These GTCs are intended to create an industry standard similar to SCOTA (Standard Coal Trading Agreement) in the coal industry. The neutral GTCs will facilitate efficient trading of metals and help to avoid lengthy GTC negotiations. This will help all parties trading on Metalshub to free up time and to focus on the trade itself, Metalshub said.

According to Metalshub’s Kreft, the transaction and information flow process typically involves buyer, seller, logistics provider, insurer and trade finance provider, a combination that is “an efficiency killer” for any analogue process. “Metalshub has managed to digitize it. Many process steps which were previously done manually, such as the creation of a legally binding contract, have been automated. This reduces costs and boosts transaction speed,” Kreft added.

Metalshub has partnered with Euler Hermes, the global leader in credit insurance, to be the first marketplace to offer its transaction insurance Wilfried.ai. This new and innovative product uses invoice level data and artificial intelligence to more accurately price credit risk.

Eventually Metalshub plans to pilot blockchain, the technology behind Bitcoin, in the metals market with the goal of reducing the risk of fraud through falsified documents, improving access to trade finance and tracking the origin of commodities through the supply chain.

The start-up is backed among others by Dieter Heuskel, former chairman of the Boston Consulting Group, Jochen Engert, co-founder of FlixBus, Ralf Köster, former chief executive officer of the Bartec Group and Gerald Schönbucher, managing director of real.digital.