Structured Commodity Finance And Trading Services

By Author: Rusca Dimitri
Total Articles: 74

Structured commodity finance is divided into three major commodities that are soft commodities, energy, metals and mining. There are many companies in the world that use structured commodity finance, some of them are lenders, trading houses, and producers. Today, good number of commodity producers availing handsome advantages from SCF, at the same assures best cash flow and greater output. In risk mitigation, companies offering commodity trading services lowers down commodity or single country. At the other hand, commodity trade finance offers liq uidy management for sale, purchase and production. Structured commodity trade finance includes inventory finance, barter, countertrade and pre-export finance. In recent years for many investors, commodities as an asset class have gained popularity to be on par with equity, bonds and real estate.

Commodity trading/investments have been providing enhanced risk-adjusted returns at a time when equities and bonds have been increasingly volatile. However it is a high risk form of trading that requires the trader to be knowledgeable about the structure of commodity market, economic factors and government policies that affect commodities besides having real time access to information on prices and interpreting them and analyzing market trends. Over the past years, the financial stock market providing the capital demand that is the result of stockpiling and the characteristic strong seasonality observed in the agricultural sector has increasingly grown and become more used by market participants. Its size had reached an annual value of 200 billion HUF, of which agricultural products had received the largest proportion through the various market participants (producers, integrators, traders, feed producers, mills). In the meantime, this market had become part of the competition between the commercial banks that are the largest financers of the sector, due to which the financing credit institutions had undertaken increasing risk levels, with respect to both degree of financing and the VAT financing related to stockholding.

At present, the practice of commodity finance by banks display a rather varied picture. Considering the exceptional degree of fall in prices and the actions of companies’ totally disregarding business ethics in 2008, it seems necessary to reveal the full scope of risks inherent in commodity financing. Commodity trade finance has a turnover of $1.5tn a year and is considered a low-risk, low-return business. In addition to the arrival of petrodollars to the sector, bankers and trading house executives said that financial institutions from China, the US and Singapore were also becoming more active in the sector. The dollar funding scarcity has cut credit availability to commodities traders by 20-30 per cent, forcing trading houses to pay more for their loans. If you are looking to grab more information on commodity trading services, better check details online.

Rusca Dimitri works in for a trade finance company for more than 20 years. He has good management skills and during his free time he writes short articles on structured commodity finance, commodity trade finance and commodity trading services.