Commodity traders are sharing bumper spoils with their workers as the industry emerges as one of the biggest winners from the coronavirus crisis.
Trafigura’s record trading results last month provided a first glimpse of a blockbuster year for an industry dominated by a small group of mostly privately owned companies that can reap huge rewards by navigating the ups and downs of volatile commodity markets.
Its 850 top staff received a near $600m cash windfall, bringing to $3.5bn the total paid out to partners since 2015.
“Covid hit the whole world but not every region at the same time,” said Christophe Salmon, chief financial officer. “That meant we could divert a cargo . . . to where there was a premium.”
Commodity traders are the ultimate middlemen, linking the suppliers of raw materials — often in developing countries — with consumers in wealthy and fast-growing ones, earning wafer-thin margins but on huge volumes.
Their global footprint and network of terminals, storage facilities and shipping fleets meant they were perfectly set up to capitalise when commodity prices cratered in the second quarter, according to Roland Rechtsteiner, a partner at Oliver Wyman and co-author of an annual report on the industry.
In oil, the companies took advantage of panic selling to snap up cheap barrels of crude and immediately sell their cargoes forward at higher prices in the futures market, locking in almost risk-free profits.
They were also able to exploit price arbitrages caused by the spread of Covid-19. This was also evident in metals where China’s quick recovery from the pandemic boosted demand at the same time mine production in African and South America was hit by lockdowns.
Trafigura’s net income come soared 84 per cent to $1.6bn In the year to September, on turnover of $147bn. In oil trading — a market whose huge swings took US crude prices briefly negative in April, gross profits surged threefold to a record $5.3bn, while in metals they jumped 30 per cent to $1.53bn.
Other traders are also on track to notch up big profits for 2020. Glencore’s trading arm reported a doubling of earnings before interest in the six months to June to a record $2bn, while net income at Mercuria was a record $277m in the second quarter.
Senior traders and executives said the structure of the oil market was the biggest factor behind the industry’s performance last year.
Gunvor CEO Torbjörn Törnqvist said 2020 had been a good year for the Geneva-based company, although it had taken impairment charges on its refineries owing to the pandemic. Trafigura also recorded $1.5bn in writedowns and impairments against the value of its industrial…
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