Trafigura's oil trading volumes jump by 25pc in FY2017
London, 11 December (Argus) — Switzerland-based trading firm Trafigura increased its crude and products trading volumes by 25pc in its financial year to the end of September, in a move to support profits amid weaker trading margins.
The company said it traded 256mn t of liquids in the period, or around 5.3mn b/d. That compares with 205.4mn t — or around 4.3mn b/d according to the company's own conversion — in the previous financial year and 146.3mn t in the year to the end of September 2015. Metals and minerals volumes increased to 69.9mn t from 59mn t a year earlier.
The company said while prices of many commodities it trades were higher in the period thanks to global economic growth, "the oil and refined product markets were still characterised for much of the year by oversupply and relatively low volatility, reducing margins and arbitrage trading opportunities".
As a result Trafigura's profit, including non-controlling interests, fell by 9pc from a year earlier to $887mn. But the firm said it was "broadly within the range of profits registered in each of the last five years".
Gross margin for the year was 1.6pc, down from 2.3pc recorded in 2016.
Revenues rose by 39pc to $136.4bn on increased trading volumes and higher commodity prices. Oil revenues represented 69pc of that amount, up from 65pc a year earlier. The Oil and Petroleum Products business and the Metals and Minerals division made "roughly equal contributions" to Trafigura's $2.2bn gross profit — defined as revenues less the cost of sales — representing a decline for the oil business because of "fierce competition combined with the lack of volatility".
"Trafigura's strategy is not to build volume for its own sake but to seek critical mass across regions and product segments as a top-tier global player," said the head of Oil and Petroleum Products trading Jose Larocca.
Trafigura said its "global reach grew, for example through establishing a leading position in exporting crude oil and refined products from the US and the doubling of oil and products volumes sold into and out of India over the year."
"For 2018 we see a positive outlook for the markets in which we trade, underpinned by increasing demand, tightening supply and the potential for greater price volatility," said chief financial officer Christophe Salmon. "As such we believe the need for the marketing, logistics and risk management services we provide can only grow over the coming year."
"In oil, we believe a supply deficit is likely to emerge in 2019 as production capacity fails to keep pace with rising demand," said chief executive Jeremy Weir. "The zinc market already has a supply shortfall and a deficit is expected to emerge in copper by 2019; even aluminium, a market plagued by over-supply for many years, is tightening due to Chinese cutbacks."