Governments ought to nationalise smelters to compete with China, says Trafigura | USAEMALL.com

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Trafigura’s new chief executive, Richard Holtum, called for western governments to nationalise parts of the metals processing industry in order to compete with China as he placed the company’s struggling Nyrstar zinc smelter in Australia under strategic review.

Speaking in an onstage interview at the FT Commodities Global Summit, the boss of the Swiss trading house said minerals processing facilities, such as smelters, should be considered “a national security issue”, adding that unless governments provided more support, the west would never reduce its dependence on China for supplies of critical minerals.

Holtum’s interview was his first since taking over as chief executive on January 1. The 40-year-old former head of gas and renewables said he wanted to make Trafigura simpler, smarter, sharper and streamline its operating assets under a new division.

“In today’s fractured, multipolar world, I would argue that uncompetitive assets . . . such as Nyrstar Australia, shouldn’t be in fully private hands,” he said.

“Critical infrastructure and smelting capacity is a national security issue and therefore needs to probably have some sort of government ownership or significant government support for it, because it is not competitive on an international basis comparing it to the Chinese smelters.”

The privately held group’s Nyrstar smelter in Hobart has a processing capacity for 280,000 tonnes per year, making it one of the world’s largest, and could be sold following the strategic review.  

Zinc smelters have been under pressure due to a global shortage of input material, zinc-bearing ores, which has driven down the tolling fees that smelters charge for processing.

Rival trading house Glencore has also been scaling back its smelting operations due to difficult market conditions, with a recent cost-cutting drive at its copper and zinc smelters in Canada. It mothballed its copper smelter in the Philippines last month.

Trafigura had been liaising with the Australian government over the future of the facility. “If I was Australia, I would be very hesitant about this smelting capacity shutting down,” he said.

Holtum has taken the helm just as the Geneva-based trader has been recovering from a $1bn fraud loss in its Mongolian oil division, as well as from a Swiss corruption trial, which implicated its former chief operating officer.

He said dealing with the fallout from the problems in Mongolia, coming so soon after a fraud in the company’s nickel business was revealed in 2023, had been a “humbling experience”.

“We have to be accountable for the decisions that we make at all levels of the organisation,” he added. “Had our people been empowered to ask the question why, maybe we would have caught this much earlier.”

Last year Trafigura created an operational assets division, headed by Jiri Zrust, to streamline its industrial assets, which are worth about $10bn and include hydrogen, power stations, mines and smelters.

Trafigura, whose net profits fell to $2.8bn last year due to the Mongolian oil fraud, has its roots in oil trading but has grown rapidly over the past decade, expanding its metals and mining division as well as in the gas and power markets.

The company’s equity value grew to $16.3bn at the end of last year, more than double the level of 2020.