White papers

Carbon removals, as an electronic certificate recorded in a registry ledger, are often oversimplified in terms of their ease of production. However, behind these virtual tonnes are very real physical assets with complex operations and risks, not dissimilar to those faced in the traditional physical commodities sector. The categories and associated risks can be dizzying for even the most experienced agronomists and technologists, let alone for corporates otherwise occupied with decarbonising their core industrial businesses. Consequently, traditional physical commodity players bring a unique skillset in managing physical asset risk and connecting markets: enabling solutions at scale by managing three key risk parameters and enablers: delivery, specification and financial tools.

This whitepaper builds on our Meeting the EV challenge: Responsible sourcing of cobalt in the electric vehicle battery supply chain publication first published in 2018 and presents an update on Trafigura’s proposals for managing the cobalt supply chain challenge posed by the continued rapid increase in demand for the raw materials for lithium-ion batteries used for electric vehicles and portable electronics.

Green hydrogen business developer H2 Energy and Trafigura have published this whitepaper to coincide with Transport Day at the COP26 climate talks taking place in Glasgow, United Kingdom. It calls for governments to act quickly on a range of policy measures to incentivise private sector investment and kick-start zero-emission hydrogen trucking ecosystems across Europe.

Reducing shipping emissions is vital in the fight against global climate change, yet greenhouse gas emissions from the global maritime sector are increasing. According to an International Maritime Organisation (IMO) study published in August 2020, emissions are projected to increase by as much as 130 percent by 2050 compared to 2008 levels if mitigation measures are not urgently put in place. 

This guide aims to shine a light on an important area of commodity trade finance: prepayment transactions.

Prepayments are a vital component of global trade. Their complexity however has grown in recent years, as have their centrality to the economies of many commodity producing countries. In recent years, Trafigura has become one of the leading companies engaged in Structured Trade Finance, with total prepayments for commodities rising from USD700 million in 2013 to more than USD5 billion in 2019.  By publishing this paper, it is our intention to enhance understanding and invite stakeholders to engage on how transparency in this area can develop in the future.

The ‘Prepayments Demystified’ guide complements the ‘Commodities Demystified’ publication first published by Trafigura in 2016.  The ‘Commodities Demystified’ series was created to explain the modus operandi of commodity trading firms and the way in which they help organise supply chains that underpin today’s globalised world.

The 2015 Paris Accord identified moving from fossil fuels to electrified transportation as a core strategy in the global effort to combat climate change. The transition to electric vehicles (EVs) is well underway. A growing number of governments around the world have announced plans to limit or ban sales of petrol and diesel vehicles. In the private sector, car manufacturers have announced multi-billion dollar EV-related investment programmes. Trafigura projects that the global EV fleet could reach in excess of 50 million vehicles by 2030.

In this briefing paper, Trafigura sets out how it intends to meet the challenge posed by the rapid increase in demand for the raw materials for lithium-ion batteries, with particular regard to the cobalt supply chain.

Commodities trading is one of the oldest forms of economic activity, yet it is also one of the most widely misunderstood. Trafigura has decided to continue its efforts to explain the business by producing a new publication: “Commodities Demystified – a guide to trading and the global supply chain”. This guide is an attempt to explain to a wide audience the functions and modus operandi of commodity trading firms, and the way they help organise the supply chains that underpin today’s global economy.

Trade finance is part of the life blood of the global economy as well as a vital tool in commodities trading. But there is growing concern in the banking and trading community that changes in financial regulation could put that life blood at risk. This concern prompted Trafigura to commission the economics firm Llewellyn Consulting to produce a study entitled “Trade finance and regulation: the risk of unintended consequences”.

The study, written on the basis of interviews with policy-makers, banks and users of trade finance, suggests trade finance is often taken for granted as a well-functioning and liquid market driven by demand. But it highlights how some of the detailed changes to banking rules now under discussion among regulators could call those assumptions into question. At worst, the paper argues, these changes could make trade finance more expensive for traders, producers and consumers, and even prompt some important trade finance banks to quit the market.

“Disruptions to trade finance, while infrequent, are highly damaging when they occur since one form or another of trade finance underpins around 90 percent of world trade,” the authors argue. “All the data shows that trade finance is an inherently low-risk activity featuring very low historic credit losses, and as such it warrants being handled with care. But there is now growing concern over the possibility that trade finance could be adversely affected by over-heavy, insufficiently nuanced regulation, particularly in an area like commodity trade finance where policy-makers may perceive the risks involved to be greater than they are. In particular, it is important that separate regulations in the areas of capital, leverage and liquidity do not add up to more than the sum of their parts.”

Commodity trading is one of the oldest forms of human activity. It is central to the global economy. Yet up to now there has been remarkably little research into this important area. The Economics of Commodity Trading Firms demystifies the commodity trading business through a combination of description and analysis.

The white paper is written by Craig Pirrong, professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. His research focuses on the economics of commodity markets. Business commentator and broadcaster Michael McKay recently interviewed the professor about the contents of his white paper.

This white paper looks at how investment in infrastructure is of vital importance for the global economy, and in particular for developing nations.

Equally, if a widening emerging-economy ‘infrastructure gap’ is to be adequately bridged, there is a requirement for much greater involvement of the private sector in the design and delivery of these assets. With government finances increasingly constrained, and the various competing claims on them are only likely to multiply, tapping the financial resources and broader experience and expertise of private investors and producers is a major priority.

Trafigura has long demonstrated competence in trading and transportation of commodities, and is also aware of global citizenship responsibilities that go some way beyond those owed to its immediate shareholders. It stands to be at the leading edge of the future expansion of global infrastructure which supports trade.

It is our hope that this white paper will contribute to an informed debate about the important role of infrastructure in fostering development, and will encourage the search for innovative public-private partnerships in this area. Since the emerging-market growth that is fuelling demand is unlikely to abate in the foreseeable future, solutions will be at a premium in coming years.

In the aftermath of the Great Financial Crisis, regulatory authorities have undertaken a searching review of firms throughout the financial markets to identify those that could pose systemic risks. This review has extended to include firms not typically thought of as part of the financial sector, even broadly construed such as Commodity Trading Firms (CTFs).

Some regulators have questioned whether some of these firms are “too big to fail,” and hence pose a threat to the stability of the financial system, necessitating subjecting them to additional regulation akin to that imposed on banks.

This white paper explains the functions of these firms and evaluates whether they pose systemic risks that would justify subjecting them to regulations (notably capital requirements) similar to those imposed on other entities such as banks which are deemed to be systemically important.

Commodity trading is one of the oldest forms of human activity. It is central to the global economy. Yet up to now there has been remarkably little research into this important area. The Economics of Commodity Trading Firms demystifies the commodity trading business through a combination of description and analysis.

The white paper is written by Craig Pirrong, professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. His research focuses on the economics of commodity markets. Business commentator and broadcaster Michael McKay recently interviewed the professor about the contents of his white paper.

LNG has experienced remarkable developments in commercialization and export capacity in a span of just 50 years. In this paper produced for the 2014 LNG Asia Pacific Summit in Singapore, Professor Craig Pirrong probes where the industry is headed as oil-based pricing becomes a relic of the past. His analysis and insights describe a potential revolution in LNG pricing and contracting mechanisms that will rely on trading firms and commodity markets to secure supply and manage risk.

The white paper is written by Craig Pirrong, professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. The white paper was written with the funding and support of The Trafigura Group.