Trafigura Predicts China Rebound on Emerging Markets

Trafigura Beheer BV CFO Pierre Lorinet
Pierre Lorinet, chief financial officer of Trafigura Beheer BV. Photographer: Munshi Ahmed/Bloomberg

The economy in China, the world’s biggest user of energy and copper, is expected to improve in the first half of next year, according to Trafigura Group, the third-largest independent oil trader.

“The news flows about China are starting to look more positive and we are looking for that to translate into the real economy,” Chief Financial Officer Pierre Lorinet said in an interview in Singapore yesterday. “Especially in the emerging world, we have come out of the cyclical downturn and will be back on the upswing.”

A recovery in the second-largest economy may lift commodity prices and trading, aiding companies such as Amsterdam-based Trafigura, which Lorinet said posted a drop in sales and “slightly” lower net income last financial year, and rival Glencore International Plc. Goldman Sachs Group Inc. has forecast a 7 percent return from commodities over the next 12 months, with energy leading the way.

“We have seen some volumes down in some of our activities,” said Lorinet, describing 2012 as a challenging and complicated year with uncertainties generated by Europe’s debt crisis, unrest in the Middle East, the U.S. presidential election and the shift to new leadership in China.

Sales at the privately held company, which doesn’t publicly disclose financial data, dropped 1.6 percent to $120 billion in the 12 months to September, after gaining 53 percent the year before, he said. Crude trading declined, while base metals and iron ore increased, he said.

Singapore Move

Net income also fell in the last financial year because of a number of acquisitions and higher staff costs, said Lorinet, who relocated to Singapore from Geneva in September as the company expands in Asia. Trafigura, which made the city-state its main trading hub this year to capitalize on regional growth, added more than 3,000 people this year across its five units and continues to hire across the board, not only in Asia, he said.

Crude oil in New York has declined 10 percent this year to $88.77 a barrel today. The loss has helped to trim gains since Jan. 1 on the Standard & Poor’s GSCI Spot Index of 24 raw materials to 0.6 percent.

A manufacturing gauge in China rose to a seven-month high of 50.6 in November, data released on Dec. 1 showed, adding to evidence that growth is rebounding from a three-year low. The economy may quicken to 8.1 percent in 2013, according to the median of analysts’ forecasts tracked by Bloomberg. Top economic officials meet this month to map out policies for 2013.

‘Come Back’

“We had anticipated China to come back from the cyclical downturn toward the end of this year,” said Lorinet, who joined Trafigura in 2002 after five years at Merrill Lynch & Co. “We underestimated the impact of the transition,” he said, referring to the handover to the country’s new leadership.

Xi Jinping succeeded Hu Jintao as president and head of the Communist Party last month in a once-a-decade change. The congress that anointed the new leaders set an objective of doubling 2010 gross domestic product and per capita income by 2020, implying annual average growth of 7 percent, Citigroup Inc. economists led by Ding Shuang wrote in a Nov. 27 report.

Goldman Sachs’ outlook for commodities forecasts a 10 percent gain for energy, 7.5 percent for industrial metals and 8 percent for precious metals, according to a Nov. 30 report. The bank said it remained overweight on commodities.

Puma Energy, Trafigura’s downstream energy unit, purchased about 290 fuel stations and seven storage terminals in Central America this year and acquired Chevron Corp.’s marketing assets in the Caribbean. It also bought assets in Vietnam and Indonesia.

Glencore, the world’s largest commodities trader, said in August first-half profit dropped 26 percent after commodity prices fell. The Baar, Switzerland-based company, which is taking over miner Xstrata Plc, said on Nov. 1 that it saw no signs of an imminent recovery in global economic conditions.

“We are not that gloomy about the world,” Lorinet said. “There may be some big events we don’t know about, which if materialize could have significant repercussions. But, on balance, otherwise the world seems to be OK.”

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