Trafigura exits warehousing in China as commodities tumble
TRAFIGURA, the world’s second-largest metals trader, is to exit its metals warehousing business in China and leave the London Metal Exchange’s (LME) network of storage facilities as commodity prices tumble.
Impala Terminals, the company’s logistics subsidiary, was also scrapping a joint venture with a unit of Citic Securities, Trafigura said yesterday.
The company would focus on handling bulk commodities and port operations.
“Slowing market conditions” prompted a review of the Impala business, it said.
“This is Impala Terminals’ decision to exit the warehousing business in China,” Victoria Dix, a Geneva-based spokeswoman for the commodity trader, said. “That is completely divorced from any business that Trafigura is doing in China.”
Commodity prices plunged to a 16-year low this week on signs that China’s economic slowdown is worsening.
BHP Billiton and Antofagasta yesterday reported firsthalf earnings that fell about 50 percent because of the decline in metal prices.
Impala and other companies, including Mercuria Energy and Citigroup, have been snared in the past year by an alleged multi-billion dollar fraud at the port of Qingdao in China.
The fraudulent trade involved metals stored in warehouses that is believed to have been pledged several times as collateral for loans.
The Qingdao and Penglai ports have been under lockdown since Chinese authorities began an investigation into the alleged fraud in June 2014.
Impala, which had about $2.1 billion in assets last year, has been investing in port facilities as well as warehousing and logistics assets from Africa to Latin America.
Scaling back
Amsterdam-based Trafigura expanded into refined metals storage in 2010 with the purchase of NEMS, a UK-based warehousing operator.
The NEMS name was dropped in 2014, and Impala has been scaling back its LME business over the past year.
It is now removing remain- ing depots in Antwerp in Belgium, the United Arab Emirates and the UK
Trafigura chief executive Jeremy Weir took over responsibility for the trader’s metals business in May after Simon Collins resigned for personal reasons. Collins had led the division for nine years.
As Trafigura exits metals warehousing in China, smaller rival Mercuria said it wanted to grow its business through its Henry Bath unit.
“Considering the changes in the metals warehousing environment in China, we strongly believe that the proven and compliant Henry Bath operating model is fit for purpose for the market,” Sean Ginnane, group general manager Asia for Henry Bath, said. – Bloomberg