E-trade finance: the race is on
Although initial international trades have been struck, the financing of commodity trade online is not as easy as many first thought. The requirements of commodity importers and exporters are complex and financiers must come to terms with the logistics that are an essential part of the commodity trade chain. Jonathan Bell, editor of Euromoney’s sister publication Trade Finance, examines the issues
In the world of commodities, there are now electronic marketplaces (e-marketplaces) and exchanges for almost every kind of commodity and semi-finished product. These range from softs such as coffee, fish, flowers and grain to the hard side with steel, base metals, as well as oil products and chemicals.
For many casual observers, commodities may seem simple on the surface, a sack of coffee, a pile of aluminium ingots – but in fact commodity trading is immensely complex, and what seriously contributes to this complexity is the supply chain. For financing to take place for cross-border trades, banks need to not only be geared up on the e-trade front, by having a suitably integrated e-trade capability, they also need to be happy with all elements of the supply chain. Only when all the logistical elements are lined up, and the Wnanciers are happy with the parties involved, can financing go ahead.
Many banks are working flat-out to come to terms with all this. Several have worked in conjunction with e-platforms, such as Bolero, Identrus and TradeCard. And the first deals are now being struck.
The Colombian coffee industry received a signiWcant boost, or perhaps e-boost, when it recently implemented a coffee export transaction through the bolero.net