INTERVIEW: ‘First and foremost, we’re a commercial trading company’ - Trafigura's Jeremy Weir

By IM Staff
Published: Monday, 12 October 2020

Trafigura’s revenue was $171.5 billion in 2019, with group businesses in metals, oil, power & renewables and shipping. Andrea Hotter talks strategy with the chief executive officer, Jeremy Weir

Jeremy Weir’s career at Trafigura almost stumbled before it began. The Melbourne, Australia-born geologist-turned-derivatives-trader was heading to meet one of the commodities trading house’s founding partners, Claude Dauphin, for dinner. Weir already had an idea in advance that the dinner was effectively an interview, on both sides, for a role at the company.

But a rail strike meant Weir was delayed, arriving 45 minutes late to the meeting at Wiltons, a restaurant in Jermyn Street, London. "I was pretty embarrassed!" recalled Weir, now Trafigura’s CEO. Fortunately, French-born Dauphin – who had approached Weir through a contact – brushed it off, and the pair had a "great conversation," Weir said. Former Trafigura CEO Dauphin was, Weir recalled, an "extremely persuasive, flamboyant and interesting character."

The upshot of the meeting was that Weir took a job at Trafigura, becoming its head of metal derivatives trading, structured products and risk management. "It [the role] was probably a little bit different to what I thought it was going to be," he told Metal Market Magazine. "I had views on what we could do in asset management and other things; I think Claude had wanted me for another role, but he let me set up an asset management business."

It was 2001, just before Enron became the largest corporate bankruptcy in US history to date and ahead of the commodities super-cycle that would lift metals, energy and agricultural products prices in a multi-year bull run. For Weir, it was about time commodities were in the spotlight.

"I remember being in the City after the Big Bang of 1986 deregulated the financial markets, and watching the boom in equities, bonds, foreign exchange – everybody had their go and we were sitting there as commodity traders wondering when it would be our time," Weir said. "And then the industry took off. The companies that were part of that business, including the trading houses, really excelled," he added. 

Weir’s background is in mining. Born in Melbourne, Australia in 1964, he has a Bachelor of Science degree in Geology from the University of Melbourne. "I worked [in] student geology for a while in central western Australia. Then commercial roles came up in the mining sector which I thought fitted my skills. That was interesting," Weir said. 

This included a stint as a marketing executive at Australian mining company North Ltd, owner of Electrolyic Zinc Co of Australasia, which eventually became Pasminco. It was here that Weir learnt a lot about non-ferrous metals and minerals, including zinc, and became passionate about the sector. 

When the global producer price for zinc came to an end, "nobody knew about hedging" at Pasminco, Weir said; so he stepped in, assuming a risk management role. Weir wanted to travel. He moved to London, where he worked in derivatives and ran the company’s hedging book.

In 1992, as banks started to expand into base metals and other minerals, Weir joined N M Rothschild. Initially, he was a derivatives trader at the bank. He later became global head of metals derivatives and a director.

"There was an explosion in what was happening [in metals], and I moved across to Rothschild in Australia, working in risk management, running books, structured finance, and doing a bit of advisory work too," Weir said. "I then moved to London, expanding the role as a main board director," he added. It was while working at Rothschild that Trafigura became a client, opening the path to the fateful dinner with Dauphin. 

Jeremy Weir, appearing at far left here on a visit to one of Nyrstar’s zinc smelters, is bullish on the prospects for metals

The path to CEO
Working with Dauphin was, Weir said, "a great run." Weir became an all-rounder, working throughout the company’s business units, including mining, mineral concentrates, risk management, finance, mergers and acquisitions, and asset management. 

Having always been on the metals side, including iron ore and coal, Weir expanded his role into Trafigura’s oil businesses at a corporate level. "That was probably him [Dauphin] grooming me, a little bit unbeknown to me, to take over his role," Weir acknowledged.

Diagnosed in March 2014 with lung cancer, Dauphin understood that he had to make some decisions at Trafigura and set about establishing a transition while remaining active in the business. He named Weir – nicknamed 'Kangaroo’ by Dauphin because the Australian could not speak French – his successor that same month. 

Weir never expected to be a future Trafigura CEO – "I probably nearly got sacked three or four times!" – but said he and Dauphin "got along very well and towards the end became very close personally."

"It was a bit of an 'Oh my goodness’ moment. I went home to my wife and I said, 'Houston we have a problem!’" he laughed. "The thing is it’s a big organization and a big responsibility. People often say, 'How do you sleep at night?’, but I have no problem sleeping at all. You just have to take everything in your stride."

The appointment was signed off by the partners – a group of individuals Weir works closely with and has very high praise for.

"Ultimately these transitions are not easy, but what I enjoy so much is the fact that I’ve got some great partners and it’s a very active environment," he said. "We can have all kinds of debates and sometimes you don’t agree with a decision, but once there is consensus, it’s quick and you get on with the job and move on to the next thing. From that point of view, it’s such a pleasure, it really is," he added. 

That approach is part of a DNA instilled by Dauphin within Trafigura, Weir said, which is "very critical for the success of our organization."

"When things go wrong, you need people to sit around a table and talk, and intelligent people will find a way out. What you don’t want is having people ostracized in a corner, victimized and taking three months to make a decision," Weir told Metal Market Magazine. 

"The company has grown, and it’s changed a lot. It’s not an organization with a single figure in charge – it’s a real partnership, and what I try and do is guide that partnership and be a steward of it, amongst some very intelligent and driven people. The governance structure has probably changed too as it has adapted; the company has grown up too," he added. 

Weir said he could "fill a page" with lessons learnt from Dauphin, but highlighted several, including fast decision-making processes, not being frightened to make mistakes but always correcting them properly, getting out to speak to people, and remembering that while the company operates across different cultures and continents, it is not a political or religious organization. 

"Wherever it may be, it’s business. And work hard is the other thing!" Weir added. 

While the work ethic – and the dinner parties at home – are common to both men, Weir’s style is at the same time different from Dauphin. "Claude was very much a hands-on guy; I like to think I’m hands on and understand the business in detail, but you’ve got to give people the autonomy to make decisions, and delegate authority so they can get on and run the business," he said.

"It is a different style of management but in today’s world, adapting is important. It doesn’t make us [Trafigura] less efficient – we’re very, very efficient. I think we [Claude and I] just worked differently," Weir added. Dauphin died in September 2015.

Trafigura’s evolution
Just as Weir’s career evolved, so too did the Trafigura that he joined. The company, founded in 1993 by several former Marc Rich top executives, had struggled in some areas in the early years as it battled for business in a fiercely competitive, over-supplied commodities environment. 

When Weir joined in 2001, Trafigura reported revenues of under $10 billion; last year, that figure was $171.5 billion. The company now has 80 offices in 41 countries, with business units in metals, oil, power & renewables and shipping.

While oil buoyed the business initially, Trafigura eventually found a winning formula for its activities in metals. As the company evolved, Trafigura launched private investment arm Galena Asset Management in 2003, boosted its trade financing activities and began investing in companies and infrastructure that streamline and simplify supply chains, including mining projects, terminals, storage, production and processing facilities. 

These now include logistics provider Impala Terminals, major zinc and lead smelter Nyrstar, and Trafigura Mining Group, which operates the Catalina Huanca lead and zinc mine in Peru and is active in Brazil and Cuba.

But Weir told Metal Market Magazine this evolution should not be mistaken for a shift towards a combined trading-asset ownership model; nor is the company, which is exclusively owned by its management and active employees, gearing for an initial public offering.  

"First and foremost, we’re a commercial trading company – that is the engine room. The businesses around that are supplementary to the commercial businesses. The fact is, if you really want to go big time into mining, it’s a pretty heavy load from a capital structure point of view, with all sorts of complexities around it," he said. 

"Quite frankly, to be big in mining we’d have to have a publicly listed vehicle like Glencore, but we would never IPO the mothership. We have no problem with assets being in a PLC and having partnerships – but the mothership should be private. The market does not understand trading companies’ balance sheets. But the banks do – they totally get it," Weir noted. 

"Therefore, the people that are really deep in and understand the industry get it. Those that aren’t don’t get it, so therefore when the chips are down and you’re having a bit of a bumpy period, all of a sudden you’re facing incoming [criticism and challenges] everywhere. I don’t want to be in that position," he added. 

Instead, the company pursues what Weir called "almost commando-style mining" – that is, it sees an opportunity, follows it, and once it has realised the value, exits or part exits, rotating the capital. 

"Never fall in love with assets – if they don’t work, get rid of them. If you’ve got a problem child, you either cut your losses, or nurse them through and build them up to what they can be, which could take years to implement," he said. "But the main driver is we have a certain amount of capital to allocate to things and are also happy to bring in partners; aligned interests is a very important part of that process. That model, to me, works," he added. 

The company’s decision to invest $2.9 billion in Nyrstar and become its majority owner was something of an anomaly for Trafigura and followed requests by the smelter’s creditors, including bondholders and banks. Trafigura is now working to turn Nyrstar around from close to bankruptcy after a series of mine acquisitions starting in 2009. 

The Nyrstar move was "opportunistic, defensive, crisis management," but ultimately Trafigura had a position in the smelter, which was at risk of going under, Weir noted. "We had to put a lot of capital into that company and a lot of effort to right that ship, and it’s still taking place. What happens in the longer term is yet to be decided, but that’s no different to any other form of asset we have over time," he said, adding that Trafigura may look to bring in partners eventually, provided the framework is correct. 

"We’re not trying to rule the world and own or operate everything. We’re looking where we can add and create value, and it’s got to be sticking to core competencies around what we do commercially," Weir said. 

Oil, meanwhile, is a core pillar for the group, accounting for two-thirds of Trafigura’s revenue in the six-month period ended March 31, 2020. With daily trade of over six million barrels of oil and petroleum products, it is, Weir acknowledged, "a massive business" which he finds fascinating, and includes a 49.3% stake in oil and petroleum products distribution company Puma Energy. The group’s shipping and chartering business, Trafigura Maritime Logistics, meanwhile services its various commodity trading teams and third-party clients.

A newer area for the company is power and renewables, in which Trafigura is positioning ahead of an ongoing transition away from conventional fossil fuels to gas. It includes a power and renewables trading desk; the launch by investment arm Galena of a Renewables Fund to be active in solar photovoltaic, onshore wind, and energy storage; investment in early-stage disruptive renewable technologies including hydrogen power and alternative fuels; as well as strategic stakes in the hydrogen sector. "It’s very early days, but power and renewables will be a strong third pillar over time – it’s a five-year vision," Weir said. 

Trafigura is not active in agricultural commodities and does not plan to be. According to Weir, "The products degrade, and with genetics you see a very different productivity set; you need a huge amount of infrastructure. Agricultural commodities have had a tough time, quite frankly."

"Our [product] mix is very decorrelated, a very good mix, and if I look across our peer group, I like our model very much. I think it’s the right model for us and, relatively speaking, asset light, and private, but with transparency – we’re as transparent as many PLCs," he added. 

Greater transparency
Shining a light on Trafigura’s activities is not something that came naturally, but the traditionally discreet company has made a conscious effort over the past decade to boost its transparency. It marks a somewhat unusual move among its peers, and was, in part, triggered by what Weir described as a "very difficult period" for the company – the 2006 waste-dumping incident in Ivory Coast. 

It began when a contractor working for Trafigura illegally dumped residual waste from a time-chartered tanker, the Probo Koala, at a series of landfill sites around the port of Abidjan, causing residents to complain of flu-like symptoms and others to allege more harmful effects. Dauphin and two colleagues arrived in Ivory Coast to help with the investigation, but were held in prison for five months in a cell with locks on the inside to protect them from attacks. 

It took protracted negotiations and a $198 million settlement payment to secure their release. The resulting international outcry and legal cases continued for years and led the company to embark on a period of self-reflection.

While the issues in the Ivory Coast were the catalyst for a change in culture and a corporate face-lift, Weir said the increased transparency was also the desire to look to the future and ensure the company was on the right path. "It was a very difficult period. It was also an opportunity for a lot of our competitors to lob 'bombs’ – this is not a friendly, let’s sit around a table and love one another, type of industry. It’s pretty hard-nose," Weir recalled. 

"In the process of reflection we looked at where we were and weren’t prepared, and what we needed to do. We still had to repair the damage and keep the business moving forward. But it wasn’t a case of, after the Ivory Coast we need to change the image. It was more about saying, what went wrong, how can we address it, and you start a process and debate things," he said. 

"That period is in the past, it’s part of Trafigura’s history – even with some positives, because it changed the organization. We’ve adapted, moved forward and done things differently. It was part of a turning point," he added. Trafigura started publishing company results in 2013 and took the step of producing its first annual sustainability report in 2015. Starting in April 2015, Weir was also the first head of Trafigura to speak in public. 

The global nature of the commodities trading business has also driven transparency. In November 2014, Trafigura became the first privately held commodities trading company formally to declare its support for the Extractive Industries Transparency Initiative (EITI), a global standard to promote the open and accountable management of oil, gas and mineral resources.

"When we started to participate in the EITI in 2014, one of our peers said, 'What are you doing?’ My response is, the world has changed – and just because we’re a private company, it doesn’t mean we have to stay below the radar screen either," Weir said. "Effectively, we have a role to play in business, in society and in the industries we’re developing. Ultimately what we should be doing is having best practices in that."

According to Weir, this extends to staff. "People want to work for a company that is doing things that are fun, exciting and pushing the limits but also at the forefront of being a responsible business. I get a lot of feedback from the banks we deal with that say we’re leading amongst our peers in terms of what we do," he said.

"Now, there’s a pride factor in that, but also at the end of the day, for me, it’s good for business," Weir added. 

Sustainable investing
The group’s sustainability report is "warts and all," and the programme has buy-in from partners throughout the organization, Weir said. "Trafigura will continue on this programme, we will continue to evolve; we’ll make mistakes, but we’ll also improve. At the end of the day, we’ll be a much, much better organization for it," he added. 

Weir – who drives a hybrid vehicle during the year and a fully-electric Mini Moke Nosmoke on holiday, "an absolute hoot!" – said the company does not plan to set unrealistic targets for the future that would be difficult for next-generation management to achieve, but has and will set "sensible and achievable targets around the business we run today."

Around 80% of the company’s carbon footprint is in marine fuels, and the company is working to significantly reduce this. "We’re leading certain initiatives targeting where we want to be. If we can accelerate that, great, we’ll change our reporting. But we’ll be clear about what we can and can’t do and what our objectives are going to be, because it’s what we should do as an organization," he said. 

The drive to decarbonization and the rise of environmental, social and governance issues to the top of consumers’ and investors’ criteria has led Weir to be bullish on the prospects for metals like copper, zinc and aluminium, as well as battery raw materials like nickel. 

The company, which set up a low-carbon aluminium trading desk last year, also recently established a financing platform of up to $500 million for the metal, designed to enable Trafigura to access financing at a preferential interest rate and, in turn, to pay a premium to 'green aluminium’ producers. 

Weir also favours power driven by renewables and carbon pricing, and said that while thermal coal is currently "in the cross hairs" because of its environmental impact, it still provides base-load power in certain areas, particularly emerging markets. 

"Rather than demonize coal, we have to find a way to say, 'How we can transition out of it without killing certain economies while at the same time reducing the carbon footprint?’ This has to be done in a sensible, logical manner," he said. 

While there will be a transition away from oil into other commodities such as hydrogen, gas and LNG, Weir forecasts that demand for oil will remain, even if capital to develop new fields is lacking. "It will require a price to incentivize the development of oil fields – you can argue the same with gas and LNG prices. Once we eventually get rid of the supply overhang, oil prices will start to pick up. But the availability of capital for certain industries is not necessarily there," he said. 

"Private equity and the debt capital markets have been severely bruised – to some degree – by what happened this year. It’s going to take a bit longer for money and capital to come back into the system, even with low interest rates," Weir noted. The resultant supply crunch could push oil prices up into the mid-$60s per barrel area in a couple of years, he added. 

Shaping the future
Weir has worked at Trafigura for almost 20 years, although he joked that he does not expect to receive a special commemoration gift in January 2021. 

"After a decade with Trafigura, I got a phone call from Claude and [former management board member] Chris Cox, and they said, 'Congratulations, you’ve made ten years in the organization!’" Weir said. "And I said, 'What do I get for that?’ and they said, 'Penalty, you get another ten years because you’ve got to pay us out of our shareholder agreement!’ That’s how partnerships work!" he laughed. 

Looking at the next ten years for Trafigura, Weir predicted the way data is viewed will be different, with the result that the trading function will also change. "What we’re doing in advanced analytics and artificial intelligence is changing things, meaning the trader will be different and need different skills," he said. 

Similarly, Trafigura will likely have a reorganized structure with a different product mix. "I like to think we’d still have a large number of people working for us because it should still be a people business and I hope we’re not sitting behind screens," he said. "We do have a diversified business model and will continue to diversify; we know what we want to be in and want to be specialists in those areas."
Weir, who spends time meeting with graduates to discover what they think Trafigura ought to be doing, said commodities trading is a great career. 

His advice to young starters in the business? "Be honest, be true to yourself, and try and travel as much as you can and experience as much as you can. Don’t overstretch, utilise the people and resources around you because people are very forthcoming in this organization," he said. "Unlike me, speak as many languages as you can, learn cultures and what people need, because when you can understand people like that you can often do business more and more."

Weir himself had several mentors, including Dauphin, "a great mentor and friend and almost like family," he said. He had other great teachers in different parts of the business, he noted, helping to guide and explain aspects of the roles. 

"My father always said, treat people how you expect to be treated," he added. His father – now aged 89 – was an identical twin; Weir himself has 27-year-old boy and girl twins. Neither are in the commodities business – "No nepotism!" he laughed. Married at 26, thirty years later the couple also have a 13-year-old daughter. "It’s a big gap, but when you have twins it takes a long time to recover!" he said. 

Sport features heavily in his spare time. Weir said that although work can get in the way, he tries to keep as fit as possible. "My wife is extremely fit, and I try to keep up with her. We ski, wakesurf and play tennis," he added. 

Weir, who now lives in Geneva, Switzerland, brings a love for BBQs from his native Australia – in all weathers. "Even in the ski chalet, people often comment that when it was snowing, they’d see a guy outside cooking a BBQ," he said. 

Weir is, he admitted, a "pretty private" individual on a personal level. "I like to party, but no one knows about that because I keep my private life very much out of the limelight – no Instagram, no Facebook, nothing like that!" he joked. "Friends and family know the rules of engagement."