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Trafigura Sees China Rebound as Sales, Profit Drop in 2012
12/4/2012 8:51:52 AM

“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 pickup 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 profit last financial year, and rival Glencore International Plc. (GLEN) 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.

Crude oil in New York has declined 10 percent this year to $88.83 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 0.7 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.

“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.

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.

“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.”