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Trafigura: commodity traders must prepare for greater transparency

Keeping the green revolution spinning will require lots of copper and oil. Producers of both have received a battering from investors keen on cleaning up the planet. But middlemen who move commodities around play a subtle yet crucial role in environmental concerns. Results on Thursday from Trafigura, the world’s largest copper trader, show business is booming. 

The privately owned Singaporean-Swiss energy to metals group regularly provides a peek into the profitability of this secretive industry. Gross profit margins have reached 4.3 per cent. Since 2013, Trafigura has not had a better consecutive 12-month period on this measure. Indeed, its $2.1bn of net profits in the six months to March beat any fiscal year since 2013. Strong rallies in copper and oil prices have helped, but, more importantly, volumes grew 15 per cent overall. 

Copper markets have boosted Trafigura’s metals business, which accounted for two-fifths of sales. Prices for the red metal have already risen 27 per cent this year thanks to its importance in the wiring of wind turbines and electric cars. Trafigura expects demand to hit 40m tonnes by 2030, up from 28m last year. New transport and energy infrastructure will account for two-thirds of that rise. 

Over time, Trafigura has sought out more hard assets in emerging economies. Sometimes this is a requirement to lock in trading business later. Notably, its results included an announcement of a €1.5bn investment to gain a tenth of a Russian Arctic oil project run by Rosneft.

Despite the market’s recent love affair with commodities, Trafigura says it has no plans to go public. This would improve its reputation, Once, new equity would have helped put debt investor minds at rest. The group carries a high net debt load of $34.5bn. Trafigura prefers to use a figure closer to $2bn, netting out its liabilities associated with inventories and securitisation. Regardless, with its profits soaring, any chatter about listing has died down.

Trafigura may well benefit from the green movement. But without a full public listing it will find it difficult to leave behind the shadowy world of commodities trading.

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