Trafigura in talks with China’s ITG to set up credit fund

Commodity trading house Trafigura Group is in talks with Chinese supply chain conglomerate Xiamen ITG Group to form a joint venture to finance commodity deals, according to people familiar with the matter.

The venture is being set up at a time when competition is heating up among traders for lucrative financing deals with commodity producers, with margins from simply buying, transporting and selling resources like oil, gas and metals expected to tighten.

Also, China’s decades-long push to secure natural resource supply chains for its sprawling manufacturing base is being challenged by the US. Meanwhile, Trafigura is facing competition as a dominant player in metal markets from other big energy traders offering cash in exchange for ores and refined metal.

Over the past year, Mercuria Energy Group has been rapidly growing its trading book, underwriting more than $3.5 billion in financing for metals flows under Trafigura’s former metals co-head Kostas Bintas.

Partnering with a Chinese state-owned firm could provide Trafigura, one of the world’s top traders and a major borrower, with additional and competitive access to funds, the people said, asking not to be named because the discussions are private. For ITG the deal would help expand its global network, they added.

Since 2022, Trafigura has been diversifying its funding base through deals with national export credit agencies in Europe, Saudi Arabia and the US.

A spokesperson for Trafigura declined to comment. ITG did not respond to a request for comment.

ITG is the biggest of a trio of state-owned raw materials and logistics conglomerates from the Chinese coastal city of Xiamen that have expanded rapidly into natural resources in recent years.

(By Archie Hunter, Alfred Cang and Julian Luk)