2021 Full-year results

Shipping and Chartering Perfomance Review

Trafigura Maritime Logistics operates as a shipping and freight service provider, securing competitive and reliable freight for in-house oil, metals and minerals traders and for third-party clients. The Wet and Dry Freight desks also function as profit centres in their own right.

¹ Approximately 65% of our wet cargo programme is on third-party owned ships.
² A vessel on hire for more than three months (excludes LNG carriers).

Wet freight

2021 has truly been an annus horribilis for the global wet freight business, featuring the worst tanker earnings in at least 30 years due to unprecedented cuts in oil production, a growing fleet and rising bunker prices.

Trafigura’s Wet Freight desk reduced its core long-term fleet and undertook a very aggressive hedging strategy, enabling us to manage what had been an historically large exposure for the company. As a result, the book was at times net short freight – a very rare occurrence. This strategy, together with a great team effort among support functions in offices spanning four continents, helped us to achieve a positive financial result well above initial expectations. We saw a significant increase in traded seaborne volumes, involving 3,608 wet fixtures and one of the world’s largest oil company fleets in the world.

Once again, our bunkering joint venture TFG Marine was instrumental in ensuring we could optimise our bunkering operations, helping us to secure highly competitive bunker prices, with consistent quality across marine fuel grades supplied, in a period of rapidly inflating voyage expenses.

For a large part of the financial year, the Wet Freight desk was challenged by an oversupply in the market and low rates. However, it benefited from a temporary hiatus in the second quarter during the Suez Canal blockage, when we were able to step in to provide customers with alternative solutions for their disrupted supply chains.

The one exception was the LPG market, where we saw owners achieving high earnings in December and January, with significant volatility throughout the first half of the financial year. Since then, the weaker market, reduced consolidation and a significant order book have changed the market landscape. Trafigura remains well positioned for 2022 and beyond to take advantage of these potentially challenging and uncertain markets.

The Wet Freight desk had a constructively busy year on the sale and purchase side and concluded more than 15 new-build and second-hand transactions across oil tankers and LPG carriers. Including this latest activity, the company has achieved close to USD5 billion in total executed asset transactions over the last five years.

Looking ahead, we remain sceptical that the market will recover significantly in 2022. Scheduled deliveries of new-build tankers remain high for next year and recycling activity has yet to pick up on a large scale. Nevertheless, we expect scrapping to accelerate as owners capitalise on high scrap values and charterers increasingly turn their focus to operating modern, more fuel-efficient vessels by 2023, when new environmental regulations begin coming into force. We believe there is potential for 2022 to be a busy period for mergers and acquisitions in the tanker industry, as firms either opt to go private or seek to merge to gain economies of scale.

Against this backdrop, we believe that the scale of our operations puts Trafigura in a unique position to enter joint ventures and cooperate with both cargo and tonnage operators in the market to improve earnings and drive decarbonisation within the tanker industry.

Dry freight

In dry freight, the year saw a strong rebound in cargo demand from 2020, but a severely disrupted supply picture, with continuing COVID-19-related delays resulting from quarantine measures and other restrictions on crew members, and slow port times as a result of stevedore and pilot shortages. Global congestion hit record highs and due to an extremely strong container market, we saw a large flow of habitual container traffic into bulk – all of which made for a robust bulk market this year. In addition, commodity flows underwent significant change thanks to sizeable arbitrage opportunities, which resulted in routes that were traditionally backhaul trades trading at parity to front haul – an unprecedented state of affairs. All of the relevant Baltic indices rose relentlessly from the beginning of the calendar year.

The Dry Freight desk had a strong year, despite the operational risk challenges created by constantly changing rules and regulations. Volumes rose from 37.4 million tonnes to 41.6 million in FY2021, of which 63 percent was from internal Trafigura business. Fixtures rose by nearly nine percent to 1,226, while profit more than doubled. The team was expanded to handle the increased demand and to help grow our third-party trading book. Two main priorities during the year were building our position on Indian Ocean routes with Supramax vessels and maintaining our position from the Pacific coast of Latin America in non-ferrous concentrates.

Looking forward, we believe that the immediate market outlook is strong, with the major risk to this view being an improvement in efficiency of fleet utilisation. Our main priority in the months ahead is maintaining our own operational efficiency by working with owners and customers to be a reliable partner whether buying or selling freight. We continue to trade in a complex COVID-19-impacted environment and with emissions regulation changes on the horizon, the year ahead is again set to be an interesting and challenging one.

We are advocating for industry-wide action on shipping emissions and investing in new technologies and vessels to help achieve a more sustainable shipping industry.

Trafigura is a member of the Getting to Zero Coalition, through which over 200 shipping industry participants have issued a Call to Action for rapid action from governments to decarbonise the sector. In September 2020, we published a whitepaper that called for a global carbon levy on maritime fuels to incentivise low-carbon innovation and we remain encouraged by the growing support for this proposal. Trafigura is also a founding member of the COP26-launched First Movers Coalition, which is focused on reducing emissions in key hard-to-abate industries. As part of its pledge to the First Movers Coalition, Trafigura has also committed to convert six vessels – 18 percent of its current owned fleet – to use zero-emissions fuels by 2030.

Other initiatives in which Trafigura is involved include co-sponsoring MAN Energy Solutions green ammonia two-stroke engine and co-funding studies focused on using green ammonia as a zero-emissions shipping fuel.

We are also investing in Hy2gen, a developer of hydrogen and e-fuels production technologies, and in Daphne Technologies, which is developing innovative technology to remove emissions such as nitrogen oxides, methane and carbon dioxide from the combustion gas of any fuel.

Andrea Olivi

Head of Wet Freight Shipping

Alan Cumming

Head of Dry Freight Shipping