Trafigura Scores $3 Billion Profit on Commodities Rebound

[view original post]

Trading house Trafigura Group Pte. Ltd. rode rising commodity prices to post record profit, making it a big winner from the pandemic economic rebound.

Trafigura reported $3.1 billion in net profit on $231.3 billion in revenue in the 12 months through September. Wednesday’s results made the 2021 financial year the most profitable for the company since it was founded in 1993.

Trafigura’s profit almost doubled from 2020, at that time a record year for the company, which scored by loading up on cheap barrels of oil when prices dropped early in the pandemic. In 2021, Trafigura benefited from the reversal of that coronavirus-induced slump in commodity markets as demand for fuels and materials jumped, particularly in the U.S.

Trafigura, based in Singapore and run from Geneva, is one of the world’s biggest independent commodities traders, handling about six in 100 barrels of oil consumed each day along with massive quantities of copper, coal and other materials. It has interests in mining, logistics and industrial-metal operations, and owns a hedge fund that gained 82% in the 2021 financial year. Trafigura is privately owned, but bonds issued to finance its sprawling business trade publicly.

Prices for commodities including gasoline and copper rose as vaccines enabled the world economy to pick up speed. Haywire moves in markets such as coal and natural gas gave opportunities for traders to move commodities from places where prices were low to those where they were higher.

In one sign of resurgent consumption, Trafigura traded an average of 7 million barrels of oil and petroleum products a day, up by a quarter compared with its 2020 financial year. Across the year, Trafigura traded 22.8 million metric tons of nonferrous metals including copper and aluminum, up 9%.

“Metals performed particularly well,” said Christophe Salmon, Trafigura’s group chief financial officer, on Wednesday, pointing to a quick recovery in Chinese demand and the need for metals such as nickel to electrify swaths of the world economy.

So far, the Omicron variant of Covid-19 hasn’t caused Trafigura significant additional logistical difficulties. “Supply chains generally over the past year have been quite disrupted,” Mr. Salmon said.

Rising prices and volumes helped offset a $716 million blow to earnings from the treatment of foreign-exchange losses when Trafigura consolidated ownership of its retail-fuel business Puma Energy.

Trafigura’s bumper year was marred by the deaths of three employees and three contractors at work. Three of the deaths occurred at mines in Tennessee and one in a mining accident in Spain. The company is taking steps to improve safety across its operations, Chief Executive Jeremy Weir said in Trafigura’s annual report.

Jeremy Weir, Trafigura’s chief executive, said the company is taking steps to improve safety.

Photo: F. Carter Smith/Bloomberg News

Rising prices have required commodity merchants, which rely on borrowed money to finance their trading businesses, to secure more funding. Trafigura took on an additional $6 billion in bank financing in its 2021 financial year, taking its total credit lines to $67 billion excluding those extended to Puma.

A longer-term uncertainty facing Trafigura and other commodity traders is the transition away from fossil fuels. The company, rivals Vitol Group, Glencore PLC and Mercuria Energy Group Ltd., has set up trading desks for carbon credits and electrical power in an effort to diversify from oil, gas and coal.

However, those markets accounted for a sliver of Trafigura’s profit. In other ways the trader is doubling down on fossil fuels, having bought a 10% stake in Arctic oil project Vostok Oil LLC from Russia’s Rosneft Oil Co. in December 2020.

In 2012, the Netherlands experienced a 3.6 magnitude earthquake. It was caused by one of the world’s largest gas fields, known as Groningen, and it set off a chain of events that’s contributing to today’s sky-high energy prices. WSJ’s Shelby Holliday explains. Illustration: Sebastian Vega

Corrections & Amplifications
Trafigura trades about 6 in 100 barrels of oil consumed each day. An earlier version of this article incorrectly said it traded 6 in 10. (Corrected on Dec. 8)

Write to Joe Wallace at Joe.Wallace@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8