No crunch for commodities

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Commodities hiring and pay have been hot for as long as we can remember. Looks like the future's set to repeat the past.

Bloomberg ran an article last week which suggested commodities hiring remains hotter than the fires of Hades and that several senior commodities types have used their sector's popularity to inveigle their way into more senior positions.

According to Bloomberg banks in the US have hired 450 commodities traders this year, up a third on 2006. Lehman reportedly added 100; JPMorgan added 45; Barclays Capital has 'ring-fenced' its commodities desk from any redundancies; and other banks are said to be shifting staff into commodities from crisis-hit areas in fixed income.

With oil at $90 a barrel and banks looking for ways to heal their sub-prime wounds, indications are that commodities are also flavour of the month this side of the Atlantic. Bloomberg quotes Paul Chrispin, a commodities headhunter at Principal Search, who says he's never been busier.

Jakob Bloch, managing director of UK-based search firm Commodity Appointments, confirms the sector's undaunted by the credit crunch. Justin Pearson, managing director of human capital search in London, says it's a smidgen quieter, but this is more down to the fact that banks' recruitment processes have been become more protracted than any lack of appetite for commodities experience: "Banks are being a bit more prudent - hires are requiring sign-offs one, two, or even three rungs above."

Barclays Capital, Citigroup, UBS, Credit Suisse and numerous others are all expected to hire next year, and pay is predictably robust. Chrispin told Bloomberg commodities traders are earning five times more than five years ago.

Pearson tells us one-year guarantees for new hires are the norm, and two and three-year guarantees aren't unheard of. Top commodities traders are earning $10m, but before anyone gets too carried away, it's worth bearing in mind that most move on packages of (just) six figures.

Local difficulties at JPMorgan

Before staking your career on an ongoing commodities boom, it might also be worth casting an eye over to JPMorgan, however. Dealbreaker points out that the bank's new staff (many of whom apparently came from the collapsed natural gas hedge fund Amaranth) haven't done quite as well as anticipated.

Last March William Winters, co-head of investment banking, reportedly told investors that energy trading would add between $100m and $160m in annual earnings in 2007. But last week the bank said 3Q commodities results were 'significantly lower'.

Although commodities prices were hit by the credit crunch in the summer, and are likely to fall again if global economic growth slows, it's not immediately clear what hit JPMorgan. However, banks' eagerness to shell out large upfront packages for commodities traders is liable to fizzle out if results aren't forthcoming.