On 10th and 11th May, the titans of the commodity finance industry gathered from all corners of the world at the Beurs Van Berlage in the centre of Amsterdam for TXF Global Commodity Finance 2022 – finally back in physical format (as well as virtual) for the first time since 2019!
The under the sea themed event comprised two pre-event virtual sessions, a walking tour, icebreaker drinks, two days of fantastic content which also equated to 17 hours of on-demand virtual sessions, six hours of networking breaks, and one commodity finance themed TXF cover of The Little Mermaid’s ‘Under the Sea’, enjoyed by 300 physical attendees and 100 virtual attendees.
There were panels dedicated to discussing everything from which regions will cushion the fall from the Russia/Ukraine conflict, how the industry can advance the establishment of one standardised sustainability criteria, metal market supply squeezes and the rising cost of batteries, and what is needed to bring more institutional investors into the commodities space.
Throughout the two days of content, we heard from global heads, CEOs, bankers, traders, producers, insurers, fintechs, alternative financiers, investors, law firms and more.
Here are just some of the top takeaways:
Trade is now a mechanism for fighting war
Tariffs, sanctions, and embargos are now being used as a mechanism for fighting war, effectively weaponizing trade. In other words, the commodities that countries and jurisdictions are trading with one another are ultimately being used politically.
Embargoes against Russia have resulted in significant redirection of trade flows
In the wake of both high commodities prices, and sanctions and embargoes against Russia, traders and exporters are on the hunt to diversify the jurisdictions from which their commodities are coming from. This particularly applies to European-based traders, and may even result in a push to industrialise Europe, although this would create demand for even more new and diversified supplies of raw materials.
Overall sentiment was positive
Overall sentiment from traders towards their banking lenders was positive, with large traders having not experienced issues securing additional liquidity during such an uncertain time. The commodities market is a highly volatile one, and players are used to exercising resilience, although there is an expectation that the effects of the current crisis will last longer than most other recent industry headwinds.
Extraordinarily high volatility is a Catch 22 for traders
Traders, who typically see volatility as a positive opportunity, are experiencing a significant need for additional liquidity to meet margin calls due to extremely high energy prices, which has resulted in many of them cautiously recalibrating their risk appetite for new deals.
Investors are focussed on returns over ESG
Demand for alternative financing is rising, despite the higher margins that come with this, with even the big traders seeking to diversity their lending pool. But the institutional investor space has not yet evolved to the point of considering ESG at the forefront, and it is still profits over anything else. However, funds are in the process of developing the tools to apply more focus to ESG.
‘S’ and ‘G’ make it to the forefront
ESG and sustainability is very much at the forefront of every discussion, but this discussion is evolving to lend more focus towards social and governance, rather than environmental being the sole focus.
Supply chain management has evolved
Supply chain disruption solutions have evolved due to the host of issues created by the pandemic, but there are still not sufficient solutions for SMEs who may not be able to afford supply chain management.
Digitisation is finally out of the pilot phase
There has been some tangible progress in terms of digitalisation, with deals such as Sucafina’s digital borrowing base with blockchain trade finance platform Komgo as digital agent. Structures like this are expected to be more widely adopted but the industry is currently in the early stages of implementing this.
For those who attended TXF Global Commodity Finance, either physically in Amsterdam or virtually, all the plenary sessions are currently available on-demand here on TXF’s virtual events platform.
Sea you next time!
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