#commodity finance

Importing-exporting goods overseas are associated with a variety of questionable concerns for global traders. From receiving payment on time by the importers to getting the delivery of ordered goods by the exporters, trade finance is full of overseas complications. Commodity trade finance services eliminate all these risks by guaranteeing timely payment & performance of T&C of the contract. But these aren’t the only risks in commodity finance.

The commodity trade industry is prone to various risks that can make a huge difference in how global commodity traders perceive growth in their businesses while importing-exporting goods overseas. It can disrupt the trading operations of a company as well as financial performance. These risks often result in currency fluctuations and affect every business engaged in global commodity trading. Therefore, incorporating a solid risk management system is essential to ensure smooth trade operations.

Here, we have accumulated a few common commodity trading risks and ways to manage them. Take a look:

How To Manage Commodity Trade Finance Risks?

Commodity trade risks are vital to be noticed and addressed for an organization dealing in international trade transactions to further avoid future complications between the associated parties. Every global trader needs to understand both the causes and ways to resolve them.

Read our success story to see how a Nigerian buyer concluded their Frozen Fish deal using Documentary Letter of Credit, as their payment term. To open a Letter of Credit on behalf of your company, you can contact us today! We, the Letter of Credit Providers in Dubai support your imports by providing collateral-free Import LC issuance from international repute banks. For more info, visit: https://importletterofcredit.com/documentary-credit/

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A Singapore senior minister says the city-state’s financial regulator does not plan to inject liquidity into the commodity finance market, insisting access to finance from the banking sector remains robust.

Tharman Shanmugaratnam, a senior government minister in charge of the Monetary Authority of Singapore (MAS), said this week that demand for working capital has increased among commodity traders due to higher margin requirements.

As a result, traders “have had to use derivatives more widely to hedge their exposures against price volatility”, he said in response to a parliamentary question on risks to the financial sector. “Firms which do not manage their risks well may run into difficulty in servicing their loans.”

In addition, virus containment measures introduced in China are expected to disrupt production and supply chains, causing “spillover effects” on the city-state’s trading activity, Shanmugaratnam said.

The total exposure to commodity finance transactions among Singapore’s banks totalled S$109bn (US$79bn) at the end of last year, equivalent to around 9% of their overall credit exposure, he added.

"cross-border trade finance in emerging markets where the intention is to get repaid by the liquidationof a flow of commodities."

he STCF modular system consists in several levels, which identify the typical stages of each STCF transaction: a pre-export financing, a warehouse and transport financing, a tolling financing and an accounts receivables financing.

When considering a STCF financing technique, in addition to defining and categorizing the commodity type and its trading practices, a detailed analysis of the specific risks involved, including the allocation of risk and the mitigation and avoidance of such risk, as these risks might be specifically applicable and appropriate to STCF financing techniques and transactions, shall be considered.