Tumbling Trafigura profits signal end to commodity boom

One of the world’s biggest trading houses has posted a slump in profits in yet another sign that the boom in the commodity markets is fading.

Trafigura, whose traders make 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, down from £4.3bn in the first half of 2023 and £2.1bn the year earlier.

The tumble follows the company’s most profitable period ever, which begun with the pandemic and was supercharged by Russia’s invasion of Ukraine in

Trafigura profits hit £1.2bn in the six months to the end of March, down from £4.3bn during the same period last year

February 2022. The war in Ukraine dealt a major shock to commodity markets and put major pressure on food, fuel and fertiliser prices.

But traders benefited from this volatility, allowing companies like Trafigura to rake in billions.

However, the era of blockbuster earnings seems to have faded, with Trafigura’s chief financial officer Christophe Salmon explaining that business was now facing ‘more normal market conditions’.

This echoes a similar message from rivals, which have said investors should not expect bumper figures to continue.

In February, Glencore reported a steep fall in annual profits and lowered its dividend.

The FTSE 100 group’s commodity trading business was hit as the volatility that traders thrive on began to peter out.

Last month BP revealed profits had nearly 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 opening three months of 2024, compared to £4bn for the same period last year.

Shell profits also fell sharply after lower oil and gas prices knocked its bottom line.

Oil prices dipped last year after hefty increases in 2022 in the aftermath of Russia’s invasion, with oil trading at about $82 a barrel on average, against $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 – down from a record £2.4bn a year earlier.

Analysts have said that companies are still banking on instability, especially with the conflict in the Middle East and faltering state of the Chinese economy. Richard Hunter, head of markets at trading platform Interactive Investor, said: ‘To call the end of the cycle seems premature, with the oil majors, for example, scaling back more recently on their eventual switch to renewable energy.

‘This could be many years – if not decades – away, suggesting that underlying demand for hard commodities will be here for some time to come.’

Trafigura chief executive Jeremy Weir warned we might not be out of the woods. ‘In the near 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 spikes,’ he said.

He added that some clients were having payment problems due to high prices. Invoices more than 60 days overdue were at 16pc at the end of March, up from 5pc last year.

Read more at DailyMail.co.uk