Banks swarm to commodity traders

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14 February 2011

With the expanding scope of commodity trading companies, commodity trade banks are lapping up the numerous financing opportunities. Jonathan Bell examines the evolving scene.

Syndicated loans and pre-export financings (PXF) for raw material producers have rebounded steadily since the downturn of 2008-2009. But it is the commodity trading companies (traders) that are giving the trade finance market a much bigger and faster push than could have been expected. The traders have diversified and expanded their scope so significantly that they have become an essential force that feeds the banks.

Trading companies have moved from being pure traders of raw materials to what we see today – diverse, multi-faceted groups, working the whole supply chain of commodity production and distribution on a truly global basis. In many cases they own farms, plantations, crushing facilities, mineral deposits, mines, refineries, transportation companies, warehouses, port facilities, ports and shipping lines. This structure, along with the commodity boom, has given an impetus to commodity trade banks as well as providing a much-needed major boost to the financial...

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