Trafigura has alleged it has been the victim of a “systematic fraud” and faces a writedown in excess of half a billion dollars after discovering that shipments of nickel that it purchased failed to contain the metal.
One of the world’s biggest commodities traders said in a statement on Thursday that it had recently discovered the alleged fraud and has begun legal action against a group of companies “connected to and apparently controlled” by Dubai-based metals trader Prateek Gupta, including TMT Metals, and companies owned by UD Trading Group.
Since late December, Trafigura said that a small proportion of containers purchased from these companies were inspected and did not contain nickel. It added that the majority of the shipments are in transit and “awaiting further inspection”.
The privately held group has close relationships with dozen of banks that provide billions of dollars of financing that help underpin its daily operations.
An impairment charge of up to $577mn will be recorded in the first half of 2023 related to the alleged fraud, which Trafigura said involved “misrepresentation and presentation of a variety of false documentation” by the companies.
TMT Metals describes itself on its website as a non-ferrous metals, minor metals and ferroalloys trading merchant. TMT Metals, Gupta and UD Trading did not immediately respond to requests for comment.
Nickel is the most highly valued base metal, trading at more than $28,000 per tonne compared to around $9,000 for copper.
The nickel market spiralled out of control last year following Russia’s invasion of Ukraine, prompting the London Metal Exchange to suspend and cancel trades.
The impairment will be a potentially significant hit to Trafigura’s earnings, equivalent to more than 7 per cent of the record $7bn net profit the company made in its 2022 financial year.
Trafigura said, however, that its first-half profit for 2023 was still expected to exceed those in the same period in its last financial year, suggesting the company is on course for another strong year.
Trafigura’s earnings have surged in recent years on the back of increasingly volatile energy markets.
Source: Financial Times