After a careful research institutional investor decides to invest in an antimony. He believes a price of antimony will appreciate due to decreases in output capacities of Chinese smelters coming from new environmental measures enforced by Chinese Government, increased appetite from China’s State Reserve Bureau, who seems ready to embark on the buying spree and growth of fire retardants market due to raising attention to safety standards in emerging markets.
He quickly realizes that it is difficult to gain exposure to the antimony. Producers are mostly medium sized privately-owned smelters in China and in Russia.
Yet being fully aware of historical volatility of prices for this metal, fluctuating from USD 6000/MT to USD 13 000/MT, he thinks the market is now in doldrums and he strongly believes it is a good moment to buy, with an investment horizon of 10-12 months.
He also sees it as a great way to diversify from his other alternative investments. Since he sees historically a very low correlation in between prices of antimony and assets in his portfolio.
There is no derivatives market for antimony, unlike for many other commodities and no ETFs holding shares in antimony mining companies. There is one mining company listed in Canada, whose part of portfolio consists of antimony mine. Yet the institutional investor knows very well that if he acquires shares in this company his actual exposure to the appreciation of antimony price on the global market will be close to none.
His friend from the industry recommends him to contact Scandium Solutions. Scandium Solutions acquires most widely traded grade of antimony on Institutional Investor’s account, checking carefully through best in class testing companies whether its chemical composition reflects what is stated in the contracts. One lot turns out to be “off-specs”, after a short argument solved through 3rd party independent testing, supplier agrees to pay penalty and to cover costs of testing activities.
Scandium Solutions arranges Singapore warehousing company with over a hundred years of tradition and adequate security measures to store the antimony. Such location cuts also on logistics expenses since biggest antimony producers are in China, guarantees low legal overhead, since storing antimony does not require any additional permits in Singapore and provides tax advantages as antimony is hold in custom bonded warehouse without a need to pay any of Singapore’s duties.
Scandium Solutions, based on the intimate knowledge of minor metals & rare earths trading practice, acquires only such antimony on account of Institutional Investor that is already stored and independently weighted in the warehouse, therefore minimizing the operational risk for the client.
Scandium Solutions arranges to insure the antimony for the time of storage, using a reliable global insurance company with experience in handling of minor metals and rare earths, thus being able to secure low premiums.
Institutional Investor decided to store the antimony with one-year horizon. Based on this unusually long period in physical commodity trading world, Scandium Solutions helped to secure low storage costs with the warehouse.
Institutional Investor turned out to be right with his forecasts. Price shoot up and even after all the costs, Institutional Investor is facing a 45 % absolute return.
He decides to cash in and liquidate the position. Scandium Solutions, sells the antimony with collection in the warehouse, through secure provisional release facility, to minimize the risk for the Institutional Investor and provide the terms and conditions that will be widely accepted by rare earths and minor metals traders and direct consumers. It takes only a week to liquidate physical position, as Singaporean market is well known for its active antimony market.
Institutional Investor is more than likely to turn to Scandium Solutions again in the future, when he sees an opportunity in minor metals & rare earths markets.
Institutional Investor being a Hedge Fund Manager, knows how difficult it is to generate alpha. He is happy he thought outside of the box, to achieve what he did. After all he is who he is, because he chooses to follow the herd only when it suits his interests… Otherwise he enjoys choosing the road less traveled.