Trafigura wrestles with future of metals unit

SINGAPORE: Commodity trading giant Trafigura Group has been exploring a range of potential deals involving its metals business, as it grapples with the unit’s future following a string of missteps.

Trafigura’s metals business has been under pressure for over a year, as profits shrunk and the company was hit by a massive alleged nickel fraud.

The contrast with its hugely profitable energy traders has triggered tensions inside the company at a time when it is also facing questions about succession, with executives jostling for position after one of Trafigura’s longstanding leadership trio announced plans to retire next year.

Trafigura, which vies with Glencore Plc for the title of the world’s largest metals trader, has held preliminary discussions about the business with several potential partners in the Middle East and Asia, according to people with direct knowledge of the matter.

The discussions have encompassed a variety of possible deals, ranging from joint ventures on new acquisitions through an investment in some of Trafigura’s metals assets or other forms of regional or global partnership, the people said, asking not to be identified as the discussions aren’t public.

Separately, several parties are examining the possibility of a bid for some or all of Trafigura’s metals unit, other people said.

However, it’s not clear whether Trafigura would welcome any such approach.

While the company has been open to selling stakes in its assets, it has long argued that the best model for its trading business is as an employee-owned partnership.

But in several recent conversations, senior Trafigura executives have indicated that they might be willing to entertain the possibility of opening up the metals trading business to external investors, some of the people said.

A deep-pocketed partner could give Trafigura additional firepower to buy assets like mines or processing plants – seen by many as increasingly crucial to secure the flow of commodities needed for a global trading business.

A Trafigura spokesperson said: “We remain fully committed to our metals business which is a key part of our energy transition strategy, and we see no reason to comment on market rumour or speculation.”

The discussions highlight the drama playing out within Trafigura, one of the world’s largest traders of metals like copper, nickel and cobalt, that could be felt across the world as the energy transition catapults those markets into the global spotlight.

Tension between the energy and metals sides of the business is nothing new for Trafigura, but it has intensified in recent months.

The firm has notched up record profits thanks to the energy crisis triggered by Russia’s invasion of Ukraine, reporting US$9.9bil in net profit in the 12 months through March this year. But its metals unit has struggled to make money. — Bloomberg