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Treasury

Commodity trade finance at the crossroads

Fraud, commodity prices and concerns over defaults have created a perfect storm for commodity trade finance – and the capacity of trading firms and finance funds to support the market remains unclear.

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Commodities trade finance revenue pools continue to decline: revenues from institutional clients and corporates with annual sales turnover in excess of $5 million were down from $2.4 billion in the first half of last year to $1.7 billion for the first six months of 2020, according to data from Coalition.

Unsurprisingly, the decline was particularly pronounced in the second quarter of this year, with $700 million of business done compared to $1.2 billion in the same period of 2019. Some estimates for the decline in commodity trade finance revenues this year suggest banks could see their income fall by almost two-thirds.

Jean-François Lambert, Lambert Commodities
Jean-François Lambert, Lambert Commodities

In the wake of BNP Paribas suspending new commodity trade finance deals, Jean-François Lambert, founding partner of commodity trade finance consultancy Lambert Commodities, describes the withdrawal of ABN Amro as a worrying development.

“ABN

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