Trafigura warns of looming trading squeeze amid tariff pressures

Commodities markets are on course for a global trade slowdown in the second half of 2025 if new tariffs are forced through, Trafigura said June 5, hinting at further downside risk for profits that have already come off sharply from the record highs of 2022-2023.

In an interim financial report covering the six months to March 2025, the global commodities trader reported marginal growth in its net profits and energy turnover, but warned of challenges ahead in a deteriorating trade landscape.

"This is clearly a volatile environment and not one that supports strong commodity demand," said Saad Rahim, the company's chief economist, seeing bearish pressure from a raft of tariffs unveiled by US President Donald Trump after the reporting period.

Market turbulence propelled record profits for the major traders in the wake of the COVID-19 pandemic and Russia's invasion of Ukraine in 2022, as companies like Vitol and Trafigura were poised to absorb short-term market shocks.

However today's geopolitical volatility could prove more challenging for the business, Trafigura warned.

"Increased volatility may not necessarily translate into physical trading opportunities, as current market movements are driven more by policy-focused decisions rather than traditional supply-demand disruptions," its statement said.

Steady performance

In the half-year reporting period, Trafigura saw its net profits grow 3% year over year, leaving levels close to four-year lows but comfortably above pre-pandemic levels.

Trading volumes in Trafigura's core energy trading business, including oil, natural gas and LNG, totaled 7.2 million b/d, consistent with 2024 levels.

In its non-ferrous metals and minerals segments, turnover dropped due to a focus on high-value tonnage, the company said, reporting respective declines of 5% and 20%.

"A snapshot of commodity markets today would indicate that demand is holding up well," Rahim said in the statement. However, he expected a "year of two halves," seeing high tariffs, inflationary pressures and mounting government debt presenting a growing threat to trade.

Though final tariffs and counter-tariffs have yet to be hashed out across many segments, even the low end of rates currently under discussion risk significant pressure for key markets, Rahim said.

"Canada and Mexico, for example, are important partners for the US in terms of commodities, ranging across crude oil, gasoline, natural gas, lumber, copper, nickel and aluminum. Many of these are traded or produced on very thin margins, and therefore, tariffs of even 10% would impact those flows," Rahim said.

Additionally, tariffs may have propped up performance in the first half of the year due to pre-emptive consumption and industrial activity, risking further pressure once measures take effect, the statement said.

Future strategy

A shifting macroeconomic environment has spurred a renewed push by the trader to diversify its business beyond its legacy markets of oil and metals.

Like many of its competitors, the company has made a point in recent years of focusing on gas, power and renewables as a 'third pillar' for its business, underscored by the appointment of former division head, Richard Holtum, as CEO last year.

The half-year results statement additionally identified petrochemicals and ammonia as key growth areas, reporting "solid results" in both segments despite weaker market conditions.

Flush with cash after its record earnings run in recent years, the company has also exhibited a stronger willingness to invest in physical assets, representing a pivot from its previous capital-light approach.

In November 2024, the company acquired the French refinery Fos-sur-Mer via joint venture Rhone Energies. According to its statement, the company also recently invested in US power producer Cogentrix, providing insight into its network of 5.3 GW of gas-fired power plants.

Financing resilience

At the beginning of the financial year, the company established a new division to manage its growing portfolio of investments in physical assets, appointing Jiri Zrust, former head of infrastructure at private equity house CVC Capital Partners, as head of the new business line.

Despite challenging headwinds for global trade, Trafigura retained strong access to capital over the half-year period, inking a $5.6-billion European credit facility and financing agreements with other lenders, including the Abu Dhabi Exports Office (ADEX) and the Export-Import Bank of Korea.

As of March 31, the company had a cushion of roughly $13.5 billion in capital available for same-day access, according to its statement.

In 2024, the company said it would be forced to absorb a $1.1-billion loss linked to misconduct within its Mongolian oil business, of which $358 million was reflected in its full-year 2024 results. An external investigation into the fraud case is still ongoing, the company said.

In January 2025, Trafigura was also found guilty in a bribery case relating to payments to Angola's state energy company through a third party, and received a fine of $145.6 million.

The Trafigura statement said that an appeal on the decision remains pending publication of a written judgment.