Much of the commodity finance world has endured a gloomy few months. Faced with high borrowing costs and low price volatility, larger traders are preferring to use their own cash while smaller rivals remain frozen out – all against a backdrop of ever-growing sanctions pressure. But with alternative lenders waiting in the wings, and signs interest rates are stabilising, are reports of traditional commodity finance’s death greatly exaggerated? John Basquill reports.
2022 was a remarkable year for commodity traders and their lenders. Propelled by price volatility and shifting supply chains in the wake of Russia’s invasion of Ukraine, Trafigura, Mercuria, Glencore and Vitol each posted record profits.
Research by Sanford C Bernstein found that 11 of the largest traders, also including BP, Shell and Total, doubled yearly profits to as much as US$77bn.
2023 was a…
