Commodity firm Trafigura jumps into chemical trading with new JV

[LONDON] Global commodities house Trafigura Group said on Wednesday it is entering petrochemicals trading by teaming up with Houston-based Altis Group International to take advantage of an expanding sector.

Geneva-based Trafigura estimates the value of the global petrochemical market at US$729 billion and growing.

Oil majors have been beefing up their presence in the sector by investing billions of dollars in new plants from Asia to the United States, betting on growth in plastics demand from a growing middle class in emerging markets.

The joint venture will have two units - one in Houston and the other in Geneva - with a focus on bulk liquid chemicals such as sulphur byproducts from smelting rather than typical petrochemicals that are used in plastics.

Trafigura's Chris Clarkson, head of gasoline trading, and Tom Jay, previously head of the deals desk for refined metals, bulk and concentrates, will be on the boards of the new venture.

As a result, the move serves the trader as a bridge between its industrial metal interests and oil business. For instance, Trafigura has a major investment in Finnish nickel and cobalt miner Terrafame that will also build a plant to produce chemicals for use in electric-vehicle batteries.

A new, lower cap on sulphur content in shipping fuels by the International Maritime Organization will also create more chemical needs when the rule comes into effect next year, as well as more unwanted sulphur.

Petrochemicals are created by units called crackers that heat at extreme temperatures refined products such as naphtha or gases like ethane, propane or butane into more complex carbon molecules such as ethylene, propylene or butadiene. These are in turn further altered to make everyday objects including plastic bags, car parts and clothing.

Royal Dutch Shell is building a petrochemical plant in Pennsylvania that will process ethane from shale gas.

In Saudi Arabia, France's Total and state firm Saudi Aramco signed a US$5 billion deal to build a giant petrochemical complex at the Jubail Satorp refinery.

Elsewhere, BP and Azerbaijan's state oil firm SOCAR have teamed up to build a petrochemical plant in Turkey next to the 200,000-barrels-per-day STAR refinery that SOCAR recently completed. BP has also said it agreed a major expansion at its Lotte BP Chemical facility in Ulsan, South Korea.

REUTERS