‘Very real dangers’: Trafigura’s Olivi warns of increasing risks to strong tanker markets

Trader’s wet freight boss sees geopolitical and demand issues as potentially clouding positive outlook.

Swiss trading and shipowning giant Trafigura Group has logged strong profit in its latest financial year, but market clouds may be gathering. The company reported a strong performance across its oil, dry bulk, gas and renewables operations in the 12 months to 30 September.

Net profit was up 5% to $7.4bn year on year, while revenue dropped 23% to $244bn from $318bn, reflecting lower average commodity prices.

“Exceptional earnings were achieved during the first half of the year as our teams provided valuable services to our customers in disrupted energy markets and captured opportunities in a volatile environment,” the group said.

Conditions were more normalised in the second six months and these have continued into the 2024 financial year.

Operating profit for the energy division rose 10% to $11bn from revenue of $171bn.

Andrea Olivi, head of wet freight shipping, said 2023 was another “volatile year” as the re-routing of Russian crude and petroleum products and the emergence of non-Western aligned “shadow fleets” led to a much tighter market for tankers.

Trafigura increased transported volumes, the number of third-party customers and the fleet size under its management without giving details.

“During the year, the team expanded its portfolio through a series of deals in the open market and long-term charter agreements. Our large fleet and our access to insurance and derivative markets to hedge risk allowed us to take on more business and provide cover to our shipowning partners,” Olivi said.

He expects the tanker sector to remain well supported by new trade routes with longer haulage, as well as issues associated with an ageing fleet.

Slowing global growth

“There are very few new vessels due for delivery over the next 24 months,” Olivi argued. “If Opec production curbs are reversed and consolidation continues, there is good reason to believe that freight rates will remain high.”

But he warned that increasing geopolitical risks and slowing global growth present “very real dangers” to this positive outlook.

LPG shipping was strong on the back of booming US exports, strong demand from new propylene plants in China and delays in the Panama Canal as a result of low water levels.

Similar conditions are expected in 2024.

“It was also a high-performing year for LNG carriers,” Olivi said. “However, we forecast a softer market in 2024 as new vessels come into service, outweighing new liquefaction capacity.”

Trafigura has been looking to resolve bribery investigations by regulatory authorities in the US, Brazil and Switzerland into payments made by former employees via third parties, 10 or more years ago.

It expects to resolve the US probe into improper payments made in Brazil shortly and has made a provision of $127m in the annual report.

Source: TradeWinds (tradewindsnews.com)