If Nyrstar Were Worthless, Why Is Everyone Fighting Over It?

Nyrstar's zinc smelters are not fading industrial relics. They are quietly becoming some of the most valuable assets globally because of the critical minerals they can process. Try squaring that with the company's own narrative: a business apparently so unprofitable it needs state aid just to keep the lights on. A fresh piece of reporting out of Australia shows exactly why governments on the other side of the world are supporting Nyrstar's operations, even though they have no oversight of Trafigura's revenue streams. All the while, Trafigura itself is reporting record profits. Could it be that observers are right when they point out that losses may be engineered on paper while taxpayers foot the bill? Be that as it may, Nyrstar's assets are worth far more than Trafigura admits.

From industrial relic to geopolitical chess piece

For most of the past two decades, zinc and lead smelters in wealthy economies were treated as yesterday's industry. They were seen as energy-hungry, low-margin, and easy to outsource to cheaper jurisdictions. That framing has flipped almost overnight.

Governments across Australia, Europe and North America are now waking up to what these facilities actually process alongside their base metals. Besides zinc and lead, Nyrstar recovers antimony, germanium, indium, bismuth, tellurium and gallium. This cluster of by-product metals has become indispensable to defence manufacturing, semiconductors, energy storage and the broader clean-energy transition.

It has also become a matter of hard geopolitics. China refines the overwhelming majority of the world's critical minerals, and is willing to use that dominance as leverage, through export licensing, quotas and outright bans on materials the West depends on. Every gram of antimony, germanium or gallium that a smelter can recover domestically is a gram the West does not have to source, or beg for, from Beijing.

Australia Writes the Cheque, Trafigura Keeps the Keys

The geopolitical shift explains a lot. Three layers of Australian government have jointly already committed AUD 240 million (USD 168 million) to keep Nyrstar's Port Pirie and Hobart smelters running. On paper, this looks like sensible industrial policy. In practice, it is public money propping up facilities that remain under the control of a privately owned trading house. That same company's acquisition of those facilities is the subject of an active Belgian criminal investigation into forgery, false accounts and misuse of corporate assets.

Australian taxpayers should ask themselves a simple question. What happens to their AUD 240 million (USD 168 million) if a Belgian court eventually rules that the 2019 transfer should never have happened? That transfer is what put these assets in Trafigura's hands in the first place. It is exactly the risk we flagged in our previous article. A referral to trial alone, long before any conviction, already carries real reputational and financial exposure for everyone tied to Trafigura’s ownership of Nyrstar's assets, including governments providing state aid.

It is also worth being honest about the underlying economics, because they make the case for subsidies seem credible, and tempting. Zinc and lead smelting is, by nature, a cyclically sensitive activity with a boom-and-bust pattern. Power costs alone can eat up 20 to 30 percent of operating expenditure. Treatment charges paid by miners rise and fall with concentrate supply. The two can converge to push margins to zero, or below, in a bad year.

That volatility is real. But it is also precisely the kind of volatility a vertically integrated company can use to its advantage. A firm like Trafigura, controlling most of the value chain, from mine-facing treatment charges to trading desk to smelter, can choose to lean into that volatility or smooth it over, depending on where it wants the profit to land. In addition, losses can occur in some of the products while other (by-)products can show excess profits.

In the case of Nyrstar, next to zinc and lead the company also produces not only critical minerals but also non-neglegible quantities of silver, gold, sulphuric acid and others. Who has the helicopter view? Who guarantees that Trafigura presents a complete and holistic picture of the profitability of its group-wide metals processing operations? 

Transfer pricing: engineered losses, real profits?

This brings us to the uncomfortable question observers keep raising: transfer pricing. It is a familiar mechanism, one critics who have followed the case have long suspected was at play. In fact, it is not unrealistic to think the same mechanism is still at work today, even as Trafigura asks for state aid supposedly needed to keep Nyrstar afloat, with the threat of closure held over governments' heads if that aid does not come.

It helps to go back to the beginning: the way Trafigura took control of Nyrstar's assets in the first place. That may be where the seed of today's story lies, and perhaps also the answer to a question that keeps nagging: why has Trafigura insisted for years that Nyrstar is loss-making, even as the by-products it processes have only grown more valuable? A remarkably persistent claim for an asset Trafigura continues to fight so hard to keep.

The commodity trader was not merely Nyrstar's reference shareholder holding the majority of votes at the general assembly, a position that let it appoint its own board members and replace key management functions. It was simultaneously Nyrstar's supplier and its customer. That combination, shareholder, supplier and customer all at once, let Trafigura grant itself documented trading discounts of up to 80 percent below the benchmark. This allegedly engineered leakage systematically drained value out of the listed company, and fed directly into the liquidity crisis it was itself creating.

What appears to have been an orchestrated crisis gave Trafigura the opening to restructure Nyrstar and acquire its operating assets at a fraction of their value. Those assets had belonged to the listed company, Nyrstar NV, where Trafigura held only a 24 percent stake. Had they never been transferred, their value would still accrue to all shareholders. That is why the legality of the 2019 restructuring is now central to a Belgian criminal investigation.

Given that history, is it really so far-fetched to wonder whether a similar dynamic could be playing out in Australia today? A vertically integrated owner that also trades the metal it produces has options. It can arrange for a local operating entity to show losses "in the books." Those numbers are considerably harder to scrutinise inside a privately owned company like Trafigura than they would be at the listed company Nyrstar NV, which only raises the risk that transfer pricing effects stay comfortably under the radar.

Observers therefore suspect that the profits generated by Nyrstar's operations are recognised elsewhere within the group, for example in Singapore, where Trafigura is headquartered, or eventually in Bermuda, where it plans to relocate Nyrstar's headquarters. Regardless, an Australian operation reporting losses is also, conveniently, an Australian operation that qualifies more easily for public support.

If Nyrstar is really loss-making, none of this adds up

Which leaves the question Nyrstar Collective keeps returning to. Since 2019, Trafigura has consistently maintained that Nyrstar was, and remains, an economically unviable business it rescued rather than acquired.

If that were genuinely the whole story, why did Trafigura insist on taking control of the entire operating business in the first place? And why has it spent tens of millions of euros over the past seven years fighting the very minority shareholders seeking to reverse that restructuring and return the assets to the listed company?

None of that behaviour is consistent with owning a worthless asset. It is far more consistent with owning one that is quietly profitable, with those profits recognised elsewhere within the group. Or one whose underlying value has risen sharply because of the critical minerals it can process. Most likely, it is both.

That conclusion becomes even harder to dismiss in light of Trafigura's own financial results. While Nyrstar's operations are portrayed as barely viable and dependent on public support, Trafigura reported a record first-half profit of around US$4 billion this year, distributing roughly US$3 billion in dividends. Those figures do not prove where the profits were earned. They do, however, reinforce the obvious question: where, within an integrated group, is Nyrstar’s economic value ultimately being captured?

The contradiction does not end there. Nyrstar has just launched an advertising campaign highlighting its capacity to process precisely those critical minerals whose strategic value has transformed the industry's outlook. Companies that genuinely believe their assets are barely worth keeping do not usually spend money promoting how valuable those assets have become.

Somebody, it seems, forgot to read the script.

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