One of the world’s largest trading houses has posted a drop in profits in yet another sign that the boom in commodities markets is fading.
Trafigura, whose traders earn billions of pounds buying and selling everything from oil to zinc, revealed profits hit £1.2bn in the six months to the end of March, up from £4.3bn in the first half of 2023 and £2.1 billion for the year. earlier.
The decline follows the most profitable period in the company’s history, which began with the pandemic and was supercharged by the Russian invasion of Ukraine in
Trafigura’s profits hit £1.2bn in the six months to the end of March, up from £4.3bn in the same period last year.
February 2022. The war in Ukraine dealt a major shock to commodity markets and put great pressure on food, fuel and fertilizer prices.
But traders benefited from this volatility, allowing companies like Trafigura to make billions.
However, the era of big profits appears to have faded, with Trafigura chief financial officer Christophe Salmon explaining that the business was now facing “more normal market conditions”.
This echoes a similar message from rivals, who have said investors should not expect the excellent numbers to continue.
In February, Glencore reported a sharp drop in annual profits and cut its dividend.
The FTSE 100 group’s commodities trading business took a hit as the volatility that so characterizes traders began to ease.
Last month, BP revealed that its profits had almost halved in the first quarter of the year as the oil giant suffered from lower energy prices.
It said profits reached £2.2bn in the first three months of 2024, compared with £4bn in the same period last year.
Shell’s profits also fell sharply after low oil and gas prices hit its results.
Oil prices fell last year after sharp increases in 2022 following Russia’s invasion, with oil trading at about $82 a barrel on average, down from $100 in 2022.
And in a further sign of the times, Trafigura, which is owned by 1,400 employee shareholders, also declared £517m in annual dividends, up from a record £2.4bn a year earlier.
Analysts say companies continue to bet on instability, especially with the conflict in the Middle East and the faltering state of the Chinese economy. Richard Hunter, head of markets at trading platform Interactive Investor, said: “Declaring the end of the cycle seems premature, with Big Oil, for example, more recently pulling back on its eventual shift to renewable energy.”
“This could take many years – if not decades – suggesting that underlying demand for hard commodities will remain there for some time.”
Trafigura chief executive Jeremy Weir warned we may not be out of the woods. “In the short term, supply chain disruptions continue to persist, including due to threats in the Red Sea, and commodity markets remain vulnerable to sudden shocks and price increases,” he said.
He added that some customers were having payment problems due to high prices. Invoices more than 60 days late represented 16% at the end of March, up from 5% last year.