Ground Breakers: Coal craters, Trafigura fleeced for US$577m on ghost nickel

Thermal coal miners fall as prices take a major hit, now 43% down in 2023
Trafigura cops US$577 million impairment and takes legal action over nickel it says was never delivered
Miners fall to end the week

Thermal coal miners were the surprise undisputed kings of the Australian resources market in 2022, as shortages and the War in Ukraine sent prices to unimaginable levels, traversing all time highs of US$450/t in September last year.

But the worm has turned in early 2023.

After 243 days, coking coal is back on top of its normally poorer cousin as demand from China (which reportedly imported its first Aussie coal in over two years yesterday) has spurred a run in met coal markets.

Thermal on the other hand has been falling despite a crunch on supplies out of Newcastle and Queensland due to wet weather and rail issues.

ICE Newcastle coal futures fell 6% overnight by US$13.85/t to US$225.50/t. Front month futures for March were hammered even harder, down 16.4% or US$37.50 to US$191.50/t.

Those prices would have been considered extraordinary a couple of years ago. Now they seem pretty ho-hum, especially with inflation still chasing miners.

One of the main factors is higher than expected supplies of gas in Europe after a mild winter. Trading Economics noted Kpler data showed coal imports in Europe were likely to show a 30% year on year and 23% month on month decline in January.

Westpac economists noted this morning reports had also suggested Adani, recently rocked by claims of wrongdoing by short seller Hindenberg Research, was also in the market selling coal at a discount.

“Meanwhile thermal coal prices continued their plunge with the March Rotterdam contract dropping close to 5% to a low back to February last year,” they said.

“The contract is down 37% so far this year. And Adani was said to be offering thermal coal in Asian markets at a discount for ‘quick sales’. The Newcastle benchmark has dropped by 43% so far this year.

“Press reported that the first shipments of met coal from Australia to China in 2 years are sitting outside Zhanjiang harbour and just about to dock.”

Aussie miners were hammered on the price drop. New Hope Corp (ASX:NHC) fell 7.14%, Yancoal (ASX:YAL) is off 6.39% and Whitehaven Coal (ASX:WHC) is down 3.92%, trading below a $7 billion market cap for the first time since August last year.

Mid caps Bowen Coal (ASX:BCB), Stanmore Resources (ASX:SMR), Terracom Resources (ASX:TER) and Coronado (ASX:CRN) were all down as well, though most primarily sell coking coal, currently at multi-month highs of around US$360/t.

Coal miners share prices today:

What’s the worst scam you’ve ever fallen for?

Ever left an investment with a Nigerian Prince? Flown to Denpasar as an unsuspecting drug mule for your impossibly beautiful and non-existent Moldovan lover? Paid DFAT hundreds of dollars to mail your passport in a timely fashion?

Don’t lie. We’ve all fallen for some scam or another at some point in time, whether it’s officially recognised as such or not.

But few of us can claim to have been duped to the extent of commodity trader, miner and metals refiner Trafigura, which has apparently sent US$577 million ($830m) into a black hole for nickel it never received and may never have existed.

Bloomberg says the situation, which will see Trafigura book a massive impairment on its first half results, has been followed by the rumoured exit of nickel and cobalt trading boss Socrates Economou.

And Trafigura has taken the extraordinary step of fingering metals trader TMT Metals and its principal Prateek Gupta as the source of its despair.

“Trafigura recently discovered a systematic fraud committed by a group of companies connected to and apparently controlled by Mr Prateek Gupta including TMT Metals and companies owned by UD Trading Group. Trafigura has commenced legal proceedings against Mr Gupta and the companies involved,” it told investors and media in a statement overnight.

“The fraud concerns containerised nickel in transit during 2022 and involved misrepresentation and presentation of a variety of false documentation. The fraud is isolated to one specific line of business.

“We have seen no evidence to suggest that anyone at Trafigura was involved or complicit in this illegal activity.

“Since late December 2022, a small proportion of the containers purchased from these companies have been inspected as they reached their destination, and were found not to contain nickel. The majority of the shipments remain in transit awaiting further inspection.”

Unlike gold, nickel is shipped in large volumes, meaning it is harder to secure and is ripe for fraudulent trading, Bloomberg says. A recent run in LME nickel prices has also amped up the motivation for fraudsters.

Traditionally used in stainless steel, nickel prices fell to US$7600/t in 2016 but finally broke its shackles last year to rise above US$30,000/t by year’s end 2022 on emerging markets in electric vehicles and batteries.

It is currently trading a touch over US$27,000/t, though the market has been volatile since a short squeeze which sent prices briefly spiralling to over US$100,000/t in March last year, prompted the suspension and a liquidity crisis among nickel traded through the London Metals Exchange.