Commodities Surge Matched with Trade Financing Boost
(8 July 2022 – Global) Leading trade banks are expanding credit for global commodities trade as the Russian invasion of Ukraine ramps prices for raw materials, energy, agricultural produce and fertiliser.
Major trade financiers such as MUFG and ING are extending credit to large corporates to underwrite clogged shipping and logistics channels. Trade finance underpins commodities markets, which depend heavily on access to loans to fund the purchases, blending, storage and transport of raw materials. With the war in Ukraine artificially elevating prices coupled with supply chain disruptions, traders are pushing for additional capital to settle shipments of grains, metals, oil and fuels.
MUFG is expanding its commodity trade finance business with a new desk in Amsterdam. The Japanese bank has also acquired BNP Paribas’s commodities finance unit in the US as the French group withdraws from the sector.
“There is a bit of room we can grow, but it’s not going to be massive. ING’s overall lending to the commodities industry is rising though remains below 2019 levels. Clients are now using up much more of the credit lines already supplied” stated ING Head of Trade and Commodity Finance, Maarten Koning.
“Suddenly it’s a different market. Commodities are not only buoyant but they are totally strategic at this moment when countries and companies are reshuffling their supply chains” commented Lambert Commodities Founder, Jean-Francois Lambert.
“Risks are keeping lenders on their guard even as prices strengthen. Banks are following their customers pragmatically. It doesn’t mean they are coming back to commodities with a vengeance” Lambert added.
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