The finance heads of the world’s largest commodity buying and selling homes stated 2022 was a report yr for earnings, setting a high-water mark for the trade that’s unlikely to be repeated in 2023.
Trafigura, Vitol, Gunvor, Mercuria and CCI instructed the FT Commodities Global Summit that profitability would in all probability be decrease this yr as commodity markets have returned nearer to regular ranges of volatility.
The largest commodity merchants reaped bumper earnings in 2022 pushed by excessive volatility in power markets, together with a tenfold enhance in European fuel costs after Russia lower provides to Europe following Moscow’s full-scale invasion of Ukraine.
“The magnitude of that’s one thing that I don’t suppose any power market has seen,” stated Jeff Webster, group chief monetary officer at Swiss-based Gunvor.
Jeff Dellapina, chief monetary officer of Vitol, the world’s largest unbiased power dealer, stated this yr would seemingly see “volatility compression” in commodity markets.
Vitol disclosed this week that its turnover practically doubled in 2022 to $505bn, up from $279bn the earlier yr.
Vitol has not disclosed its 2022 revenue, however a number of market contributors consider its web revenue greater than doubled from already report ranges in 2021 to rise above $10bn final yr, although its accounts are nonetheless being finalised. The corporate declined to remark.
The bigger buying and selling homes benefited from their entry to capital final yr, permitting them to maintain buying and selling even in extraordinarily risky markets when capital necessities elevated.
“[Last year] was a chance to reap the benefits of respectable margins. I feel that’s all altering a bit now,” Dellapina stated. “Final yr was in all probability a cyclical excessive.”
Webster agreed, saying “that was in all probability a peak final yr by way of extremities of volatility after which seemingly for profitability as effectively”.
Richard Dolcetti, who runs funds at US-based CCI, stated: “At instances when there’s volatility out there and there’s excessive provide and demand imbalances, it’s our function to step in.” When you possibly can efficiently try this, “you’re going to make cash”, he added.
Whereas a few of the volatility in commodity markets has cooled, Christophe Salmon, chief monetary officer at Trafigura, stated he anticipated a return to extra wild buying and selling patterns within the years forward.
“I consider that volatility in commodity markets is right here to remain,” he stated. “Not solely are we speaking about Russia, but additionally China. I’m speaking concerning the power transition, which intrinsically will set off extra volatility in a lot of markets.”
Guillaume Vermersch, group chief monetary officer at Mercuria, stated that “intrinsic volatility stays” and “the elemental issues should not solved”.
Many of the non-public buying and selling homes preserve their monetary outcomes near their chest, however the few numbers disclosed to date are all record-breaking.
Trafigura, the one giant non-public buying and selling home to publish its outcomes, made a report quarterly revenue of $3.5bn within the quarter led to December, on high of $7.1bn web revenue within the monetary yr ending in October, an annual report.
Mercuria, which is predicated in Switzerland and registered in Cyprus, reported web revenue of $3bn within the 2022 yr, up from $1.25bn the earlier yr, on turnover of $174bn.
At publicly listed Glencore, the earnings earlier than curiosity and tax in its buying and selling division rose to $6.4bn final yr, up 73 per cent from the yr earlier than.