Trafigura in talks with Aegis on joint venture to ferryo (Logistics Partnership)

The Netherlands-based oil trader Trafigura AG is in talks with Mumbai's Aegis Logistics Ltd to set up a joint venture to ferry oil and liquefied petroleum gas (LPG), said a person with direct knowledge of the matter and two other industry people aware of the development.

“Talks are at a preliminary stage”, said an Aegis official, who did not want to be identified.

Raghu Warrier, head, media relations, Aegis, declined comment.

“We do not have any comment at this time”, Trafigura's head of corporate affairs Mark Eadie said in an email. Trafigura has representative offices in Mumbai and Delhi.

A partnership with Aegis will give Trafigura--the world's third largest independent oil trader and the second largest independent trader in non-ferrous concentrates, according to its website--a ready plat- form to enter India. In turn, Aegis will have an increased international play through Trafigura's network.

“Until now Europe and Singapore were the hubs for liquid logistics space. Such a partner- ship will help India emerge on the world map for logistics”, said one of the two industry persons aware of the development. Both spoke on condition of anonymity.

Aegis operates three liquid terminals--two at Mumbai port and one at Kochi port--with a combined storage capacity of 288,000 kilo litres. In 2010-11, it earned 48% of its operating profit of `57 crore from its liquid logistics division. It recently completed the acquisition of Shell Gas India's Pipavav facility. Trafigura, founded in 1993, had a turnover of $79.2 billion (`3.5 trillion) in 2010.

“Trafigura has been looking to enter the Indian logistics and warehousing space and Aegis gives it a ready platform”, said the industry person mentioned earlier.

According to the two industry persons mentioned above, Trafigura had explored an alliance with state-owned Indian Oil Corp. Ltd.

“The company keeps exploring options, there is nothing to comment at this point of time”, an IOC spokesman said.

The Indian logistics market is likely to cross $200 billion by 2020 fuelled by consistent growth of the economy and key industries such as automotive, engineering, pharmaceuticals and food processing, V.G. Ra- makrishnan, senior director (transportation and logistics, South Asia, Middle East and North Africa), at consulting firm Frost and Sullivan India Pvt. Ltd, wrote in a February report. The Indian logistics market recorded revenues of about $82.1 billion in 2010, a growth of 9.2% over the previous year, he added.

Trafigura, which employees 6,000 across 44 countries, handles sourcing and trading of crude oil, petroleum products, renewable energies, metals, metal ores, coal and concentrates for industrial consumers.

In the oil sector, Trafigura has access to more than 45 mil- lion barrels of storage facilities. “The logistics market in India is highly fragmented with several thousands of unorganized companies owning dominant market share”, Ramakrishnan wrote in his report.
“The total logistics spend (mar- ket size) in India represents approximately 6.2% of the country's total GDP. However, it represents about 11.6% of services GDP (contribution of the services sector to total GDP)”.

For the financial year ended 31 March 2011, Aegis saw its turnover drop 9.3% to `258.14 crore. Its net profit fell by 19.9% to `31.21 crore.

Aegis is well-placed to capitalize on emerging opportunities in the sector with its plans to build a network of port terminals, expand storage capacities and enter new businesses such as international oil storage (transhipment) and commercial LPG cylinders, Sid- dhartha Khemka, analyst at brokerage Centrum Broking Pvt. Ltd, wrote in a 20 June re- port. “Apart for increasing its liquid logistics business, these terminals would also enable it to enter into newer business such as crude oil storage, bunkering and jet fuel logistics”.

Trafigura has also diversified into asset management by developing offshore hedge funds and has more than $1 billion under management with Galena Asset Management Ltd, its multinational asset management company.

Aegis Logistics' stock rose 2.42% to close at `243.10 on Monday on the Bombay Stock Exchange, while the bellwether Sensex inched up 0.80%.

(Source-: mintlive.com)