What’s Going On Here?At least Trafigura’s seeing the bright side of all this supply chain chaos: the commodity trading firm reported a record annual profit on Wednesday. What Does This Mean?This year’s supply disruptions have panned out well for Trafigura: the company – which makes its money by selling and shipping metals, oil, and other commodities around the world – has seen booming demand as countries scramble to get their economies back on track. That’s meant Trafigura has been benefiting from both higher prices and an uptick in orders, trading 25% more oil and 8% more metals between October 2020 and September 2021 than the same time the year before. But here’s the really important bit: the company doubled its profit over the same period to hit a new annual record. Why Should I Care?The bigger picture: Arbitrage, Trafigura style.
Trafigura’s done well from rising prices and rising demand, for sure, but there’s a slightly more nuanced reason it’s done so well. See, supply and demand isn’t a constant across the world at the best of times, let alone in a pandemic. That means commodity prices have varied wildly from region to region depending on how in need it is, which has allowed Trafigura to capitalize by, say, buying a cheap shipment of aluminum on one side of the world and selling it for an arm and a leg on the other.
Zooming out: It’s about to get even chillier.
Europe’s having a bit of a commodity crisis right now: Germany and France’s energy prices for 2022 – which are tracked on the futures market – rose by 15% and 14% respectively on Wednesday. That’s partly because freezing temperatures have pushed up demand among frosty-fingered home-workers, which has forced the country’s providers to burn through their scarce gas, coal, and oil stores to keep up. And given that the weather’s so inclement at this time of year, they can’t exactly rely on renewable sources to make up the shortfall either… | 