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Commodities-Trading Giant Trafigura Wins Big From Oil-Market Mayhem


Trafigura Group Pte. Ltd., one of the world’s largest commodities traders, posted a record profit Wednesday, making it a big winner from turmoil in crude-oil markets during the coronavirus pandemic.

The closely held company, which is based in Singapore but run from Geneva, almost doubled its net profit to $1.6 billion in the fiscal year ended September. The company’s operating earnings were the best in its 27-year history, it said.

Trafigura’s record windfall highlights the ability of commodity traders to thrive when prices gyrate. Like rivals Vitol Group and Gunvor Group, the company looks to profit whether commodity prices go up or down. Rather than owning mines and wells, it focuses on physical trading of commodities, arbitraging prices for the likes of crude or copper in different parts of the globe.

Trafigura did particularly well when oil prices went negative in the spring, despite a concurrent pullback in financing from banks for commodities deals. Demand for crude in cars and planes plummeted with much of the world economy in lockdown, while Saudi Arabia and Russia, two of the world’s biggest crude producers, launched a crushing price war.

“We had our busiest period in April—our busiest month ever,” said Trafigura Chief Executive

Jeremy Weir

in a video that accompanied the company’s earnings release. “It was a stunning year,” he said, adding that the company boosted its gross profit margins to 5% from 1.6% last year. While not publicly listed, Trafigura posts financial results for bondholders.

The windfall came despite a hit to the value of its industrial assets. Trafigura said it had downgraded the value of its oil-storage-and-distribution business Puma Energy, and its

Nyrstar

zinc-and-lead-smelting operations.

One of the largest traders of fossil fuels on the planet, Trafigura last year established a division focused on power and renewable energy. It wants to take part as governments and energy companies push the economy away from fossil fuels toward solar and wind power.

It expects the division to grow into a core part of its operations, alongside oil and metals, over the next few years, it said Wednesday.

The amount of green energy being auctioned globally between January and October was 15% higher than the same period last year, a record increase, according to the International Energy Agency.

Commodities traders walk a fine line between facilitating industries seen as fueling global warming and sourcing materials meant to help the transition away from fossil fuels. Rival Glencore PLC, a major producer and trader of coal, said last week that it wanted to become carbon-emissions neutral by 2050.

Trafigura’s positions in the markets for copper, aluminum, nickel and cobalt—all used in renewable-power generation and batteries—will benefit the company, Mr. Weir said. To address concerns about the impact of trading on global warming, the company plans to lay out a three-year plan to reduce its greenhouse-gas emissions and a longer plan to address “scope 3 emissions”—pollution mostly created when customers transport and use the commodities it produces.

Major energy companies such as BP PLC and Total SE have also signaled their intention to reduce their dependence on fossil fuels and invest more in renewable energy.

An abundance of fossil fuels combined with advances in technology to harness wind and solar power has sent energy prices crashing around the world. WSJ explains how it all happened at once. Photo illustration: Carlos Waters/WSJ (Originally Published July 21, 2020)

Write to David Hodari at David.Hodari@dowjones.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the December 10, 2020, print edition as ‘Trader Scores on Turmoil in Oil Markets.’



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