Metal Bulletin brings you the conclusion to Geoffrey Sambrook’s fictional traders’ tale.


Three days later, the gods showed their benevolence. Von Resch called Serck from Moscow.

“Jason, hi, I have good news. I’ve just spent the last two days with Vassily Puschkin and we agree that Arctic Mining will participate in your scheme, subject of course to an agreement being in place regarding the forward sale of the metal that Stroheim will be financing. There is one proviso there, though, that I hope you can agree to.” Serck held his breath. The formulation of that forward part of the deal was crucial to the way he intended the game to play out.

“Okay, what do you want to change?”

“It’s not really a change, but Puschkin feels that – although this is metal that would normally go to the LME at flat prices, it is in this case more like physical metal. Therefore, we would like to add a clause saying that the price will be the ruling LME at the time, plus our physical delivery premium. So you would pay the premium in addition to the LME level.”

Serck didn’t really have to think too much about that, because at the time it probably wouldn’t be relevant. But he couldn’t admit that, so he paused, and then, as if reluctantly, said “Ye-es, I suppose we could include that. I see the logic of Puschkin’s position. It means that that end of the deal it will effectively be flat for us, but then I guess that’s not really where we expect to make our money. Okay, I’ll agree to that. I’ll get our lawyers to prepare the documentation covering everything. Hey, this is good, Hugo. I’m looking forward to working with you. I think we can achieve what we want before the rest of the market has woken up.”

And so it went. Over the next few months, the until-now somnolent nickel market began to wake up and show signs of life. Customers of both Metal-Exx and Arctic Mining found themselves restricted to minimum contractual tonnages. A series of articles appeared in the press stressing the importance of nickel in battery production and thus to the advance of electric vehicles and power storage. LME stocks – after the long period of increase – began declining, with metal flowing out on a regular basis and little coming in. The price moved up as Ed Sherman acted on Serck’s instructions and built the Leopard-Star long position. And all the while, the trucks from LME warehouses, from the ports of Antwerp, Rotterdam and Hamburg headed for an old zinc refinery just outside Hamburg. In its storage sheds, which in different times had been filled with zinc concentrate and refined zinc metal, in the days when it had been blasting flat out, the stacks of nickel grew and grew. Analysts tried hard to explain the turn-around in the fortunes of the market. Some even suggested that all was not as it seemed, but without access to that facility near Hamburg – and, after all, why would a City analyst, comfortable in front of his screen with his statistics start to wander around the north German countryside looking for an answer to an uncertain question – how could anybody demonstrate that the supply/demand picture was not as it seemed?

Year-ends came, and the Arctic Mining sales subsidiary in Switzerland was able to mark all its forward contractual sales to the inflated market. Big bonuses were paid out on those numbers, and new houses, new cars, lots of lovely goodies were bought with those bonuses. Hugo von Resch became even wealthier than before. Leopard-Star had a big long position by now, and they too had very big valuation profits. Serck was a little more cautious, though; he’d never paid out on theoretical valuations. His team only saw the rewards once the money was safe in the company’s bank accounts, and reports to investors made the difference between actual and expected numbers crystal clear. The reporting periods for Stroheim and Metal-Exx were different, so they simply sat and watched for the moment.

And the momentum built (and so did the pile of metal outside Hamburg), and the price roared higher. The analysts stopped thinking about why, and simply accepted the nostrum that it was a “battery metal”, so of course it was going up. Jason Serck, who normally tried to avoid the press, was a ubiquitous spokesman for this line, and his position as one of the most influential players in the metals business made sure his opinions were well reported.

Then Serck called Max Eisenstadt over to New York, for a quiet meeting with himself and Ed Sherman, to consider the next move. Eisenstadt was getting twitchy, as Metal-Exx were getting longer by all the extra tonnage they were not letting through to customers, and Sherman was handling a large LME long. Paper profits were there, but they knew paper profits didn’t buy anything. They met in Serck’s office on Fifth Avenue on a summer afternoon, with the sun streaming in through the floor to ceiling windows.

“Okay,” Serck began, “we’re getting to the point where this trade pays out. We’re long of a lot of metal, and the price has moved spectacularly in our favor. I want to start liquidating, and taking the money that’s on the table. There are two elements here, closely linked, but also needing quite a different approach. Max, you and your guys have got physical metal that we need to get out of. That’s got to be the first priority. Switch all your offers to customers from formula pricing to fixed price. With the way the market has been moving, they’ll bite your arm off. You can offer to switch existing deals as well, dress it up like you’re doing it to help the customers out in the face of the high prices.”

“Okay, I’ll buy that for our physical metal. But what about that stockpile in Hamburg? Losing that is going to be difficult.”

Serck shook his head. “No, not our problem. That metal belongs to Arctic and/or Stroheims. I made very sure that the documentation makes that clear. We only have an obligation to take it back at the end of the finance period, at the then market price.”

“Which may well be a lot lower than now.”

Serck shrugged. “Not my problem. They know how the deal works. At least, I hope they do.”

Eisenstadt just looked at him. “I’m glad – yet again – we’re on the same side.”

Serck grinned, but his eyes were stone cold. “All I have to concern myself with is that Leopard-Star and Metal-Exx come out of this smelling of roses. Now, Ed, your position is more complex. Let’s just go through the sheets and see exactly where we are.” The three of them poured over the print-out of Leopard-Star’s position. Outright longs, call options, it amounted to a sizeable volume. “Comfortable?” asked Serck.

Sherman replied. “Yeah, as long as we have a bit of time and as long as Max’s customers don’t get concerned that the market has peaked, I think we can get out of this. I don’t mind paying up option premium for puts to help. We can afford it. So yeah, we can move this lot back into the market.”

“Good. As well as liquidating, I’d like you to go short – after all, we’ve got metal coming into the market in the future; we may as well use that too. Okay, I’m looking at three weeks to unload. Any more than that and I would be concerned that we’ll become too visible.”

The discussion went on, as they filled in the detail of what they had to do and which banks and brokers could be trusted to keep their business confidential. Fortunately, Serck was a big player and most of the market knew crossing him was not a wise move.


Four weeks later, it was all over. The nickel price had pretty much halved, the Metal-Exx physical book was back to balance and Leopard-Star’s only nickel position was the put options they held as a group hedge against the physical metal they had contracted to take from Arctic Mining/Stroheims at the far end of the financing deal. The whole exercise hadn’t shown a great deal of profit for Metal-Exx, but in contrast Leopard-Star’s bank accounts were bulging. Jason Serck, far from the dissatisfied feeling of that morning driving down to the shoot in Sussex, was back in the groove. He was – bolstered by his ruthless use of the varied elements of his empire – clearly the most influential man in the metals business.

Then he got a call from von Resch.

“Hugo, good to hear from you. We were right that nickel could be pushed up. Good we go out at the right time.”

“You got out at the right time, Jason, not us. Arctic Mining now has a problem, and you must have known this would happen. The balance sheet has to take a massive hit, as the value of our metal stocks and reserves has halved. The loss there will outweigh the profit we made and booked last year. You caused that, and I thought we were friends.”

“Hey, don’t blame me for your accounting practises. I didn’t choose to pay out bonuses and dividends based on pure forward valuations. You guys were too greedy. You never locked in your profit. You got sucked in to thinking it would go up forever.”

“Mmm. I’m called to see Puschkin in Moscow next week. I suspect he will want to have a talk with you as well.”

That’s not going to happen, Serck thought to himself. “I don’t think I have anything to say to him, Hugo. We made a plan, he approved it, it worked. What else is there to say?”

“What there is to say, Jason, is why didn’t you tell us when you decided to liquidate?”

“That was never in the deal. We never agreed anything about that; we each had our own positions, and our own responsibilities. We set the deal up together, but it was never a profit share j/v. Hey, I’ll be over in Europe soon; maybe we can meet.” And the phone went dead in von Resch’s hand.

What he hadn’t told Serck, and what was the major cause of the problem he was going to have difficulty explain to Puschkin, was that the Arctic Mining sales company, under his direction, had chosen to build its own LME long position. Part of the reason Sherman’s job of liquidation had been so smooth was that his co-conspirators were actually taking the other side of some of his sales. The loss for Arctic was not just the balance sheet issue he had talked to Serck about; there was a genuine P&L loss as well, and explaining that was going to test his persuasive powers to the limit when he sat in front of Puschkin. Von Resch really wasn’t looking forward to next week, particularly when he thought of the very large bonuses he had persuaded Puschkin to approve on the valuation profit. That was going to make it an extremely uncomfortable discussion.

Jason Serck decided he and his wife needed a break, so they flew down to Jamaica. Maybe it wasn’t the best time of year for the Caribbean, but the sun was shining, the sea was warm and they could relax. But Serck couldn’t entirely switch off, and he kept his eye on the news services and the market information. Four or five days into the trip, a small report on the BBC website caught his eye. Headlined “Austrian banker dies in mountain car accident”, the text went on:

“Austrian socialite banker Hugo von Resch, chairman of influential Vienna-based private bank Stroheim & Co, was found yesterday in the remains of his BMW i8 sports car. He appeared to have gone off a mountain road in the early hours of last Tuesday morning. Austrian police declined to comment, but BBC sources suggest the road was dry and clear at the time, prompting speculation about what could have caused the car to leave the road.

Von Resch was well-known in Viennese society, and, through his bank’s business, was a close associate of a number of Russian oligarchs.

Austrian police are continuing to investigate the circumstances of his death.”

Serck shivered, despite the Jamaican sunshine. He knew a little about unexplained car accidents on mountain roads. After all, that’s how Mack McKee had died, all those years ago in the wake of the Kanagi affair. That one had cost Serck a lot of money.

A week later, Serck slipped into the Stephansdom in the center of Vienna. He felt he should attend von Resch’s funeral; after all, the man had been instrumental in the success of the nickel play. He sat near the back of the cathedral, in front of him the great and good of Austrian society. As the organist began to play, and the beautiful Bach chorale issued from the soaring organ pipes, a man stepped into the pew next to him. Serck glanced at him. He was wearing a perfectly tailored suit and a heavy silk tie against a cream shirt. What differentiated him from the other mourners was the pair of dark aviator sunglasses he wore, despite the gloomy atmosphere of the cathedral.

The service ran through, with several eulogies to the deceased, and finally the pall-bearers lifted the coffin from the front of the nave and made their slow march down the aisle. The congregation followed behind them as they passed. As Serck left his pew, the man next to him fell in beside him.

They walked slowly through the massive door, out into the bright sunlight of the afternoon.
“Mr Serck,” the man turned and spoke, “my name is Anatoly Vassiliev. I work in the private office of Vassily Puschkin in Moscow. He has asked me to tell you that he is very unhappy with the recent movements in the price of the nickel metal on the London Metal Exchange. He believes that you may have some knowledge of what has been happening, that you may have been involved in something, together with Mr von Resch, whose sad passing we are mourning today. Mr Puschkin has asked me to suggest to you that you should keep looking over your shoulder, Mr Serck. You can never tell when something bad may be about to happen.” With that, he turned, and strode off across the Stephansplatz, leaving Serck staring after him.

Two hours later, Jason Serck sat in his suite at Sacher’s hotel. For probably the first time in his life, he was frightened. He had no illusions about what Vassiliev had intended to convey. Had he bitten off more than he could chew, in using the Russian oligarch as the fall guy for his scheme? In the past, he’d always been the one holding the aces, the one in control. Had this been the hubristic trade that would leave him looking warily behind himself for the rest of his life? And how long would that be? Hugo von Resch already appeared to have paid the price.

Read the preceding chapters of the story here.

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