Because nickel makes the colossus Trafigura cry
A nickel fraud cost commodity trading giant Trafigura a $577 million loss. Here are the company's details and countermoves
Trafigura, one of the largest commodity trading companies in the world, suffered a loss of more than half a billion dollars after it discovered that some shipments of nickel it had purchased did not contain the metal.
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DRILL AGAINST PRATEEK GUPTA
Trafigura believes that there is systematic fraud against him, and said he has launched a lawsuit against the Indian businessman Prateek Gupta and several companies related to him, such as TMT Metals (a British metal trading group) and the subsidiaries of UD Trading Group (a Singapore-based metals trading company).
LOSS OF 577 MILLION
The nickel fraud cost Trafigura $577 million in damages, although the final impact, notes Bloomberg , could be less if he manages to recover some of the funds.
ECONOMOU LEAVE PIERCING?
According to the agency, the head of the division that deals with the trade of nickel and cobalt (both metals are necessary for the production of electric vehicle batteries), Socrates Economou, is about to leave the company. Trafigura, however, excludes that any of its employees were complicit in the fraud.
Economou has been with Trafigura since 2007, and in 2016 was appointed head of the nickel and cobalt trading division after leading the development of operations related to the two metals in the Democratic Republic of Congo. Bloomberg calls him a "veteran" of Trafigura, one of the longest-serving traders , but in 2021 he lost his promotion to head of the metals division.
THE DISCOVERY OF THE FRAUD
Trafigura has been doing business with companies linked to Prateek Gupta since at least 2015, but last year it began a process of reviewing its relationship with the Indian businessman.
The company purchases the nickel in containers already on board the ships, and resells it once the vessel has reached its destination. Just before last Christmas, however, Trafigura employees went to the port of Rotterdam, in the Netherlands, to inspect a container that was supposed to contain nickel: instead, they found materials of much lower value.
In a note, Trafigura says that “since the end of December 2022, a small part of the containers purchased by these companies have been inspected upon arrival at their destination and found not to contain nickel. Most shipments remain in transit, pending further inspections.”
THE NICKEL TRADE
Nickel is often targeted by scammers. Despite being a metal of great value – a single container can carry the equivalent value of 500,000 dollars – and despite being traded in large quantities, its shipments are not protected by stringent security measures, unlike what happens with gold and with other precious metals.
HOW ARE THE ACCOUNTS OF TRAFIGURA
The loss of 577 million will prompt Trafigura to rethink its processes for verifying economic transactions and controlling commercial counterparties. The unit that deals with metals is likely to come under greater pressure, explains Bloomberg : its operating result in the first ten months of 2022, however, was down 24 percent year-on-year, contributing only 16 percent to the total operating result of the company, the lowest for a decade.
Despite the backlash over nickel, Trafigura said it expects overall profit for the six months ending in March to be higher than last year.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/trafigura-nichel-frode-577-milioni/ on Mon, 13 Feb 2023 10:35:02 +0000.