The marketplace is an attempt to bring commodities into the digital age and lower the transaction costs of physical trading © Bloomberg
A group of former Glencore traders have announced plans to launch an eBay-style marketplace for metals, the latest attempt to shake up the way commodities are bought and sold.
Open Mineral aims to connect miners with customers such as smelters by offering a cloud-based platform on which the two sides can negotiate and sign contracts.
“Physical commodities have been traded in the same way by the same companies for decades,” said Boris Eykher, chief executive of Open Mineral and the former chief financial officer at a Glencore-owned zinc producer in Kazakhstan. “Just as eBay revolutionised retail purchasing by bringing buyers and sellers together directly, we aim to do the same for the physical commodity producers.”
The marketplace, which will go live in August, is the latest attempt to bring the world of commodities into the digital age and lower the transaction costs of physical trading, which is still mostly done using paper documents.
This year, Simon Collins, former head of metals at the trader Trafigura, is set to launch a Singapore-based online platform for producers, consumers and traders of commodities to negotiate contracts.
In May, Martin Abbott, the former head of the London Metal Exchange, launched a digital platform for metals trading.
Large commodity traders are also testing blockchain — the electronic ledger originally built to underpin bitcoin markets — as a way to settle deals in the oil market.
Open Mineral will focus on the raw form of metal, which is called concentrate. It will allow miners to put up tenders for their concentrate directly to end users, initially focused on zinc, lead, copper, gold and silver.
While refined metal is priced according to standard global London Metal Exchange contracts, raw metal concentrate varies in grade and quality.
Commodity traders such as Trafigura and Glencore make money by buying concentrate from mines then blending and refining it before offering it to customers. That allows them to arbitrage price differences between markets and take advantage of sudden pockets of demand.
Open Mineral aims to allow smelters and miners to capture more value from concentrate by providing transparency on what is available, said Mr Eykher.
“It does not replace personal relationships but technology helps you run things easier and capture more value,” he said. “In today’s world to help concentrate move from Latin America to China there are emails with intermediaries. A lot of that is unnecessary.”
Open Mineral will also provide trade services such as transportation, surveying, assaying and insurance, Mr Eykher said. It will only be open to miners and smelter and not to third-party traders.