3 weeks ago

Commodity Volatility Tests Whether Trade Finance Can Survive

A company can have enough money to buy goods and still struggle to complete a trade.

This can happen when a country delays foreign-currency payments or a seller requires a special bank guarantee.

Banks may also avoid certain products, such as thermal coal, because of environmental rules.

The buyer’s ability to pay and the buyer’s country can create additional concerns.

When commodity prices rise, the same amount of money buys fewer goods.

Delays in shipping or payment can keep the money locked up for longer.

When prices fall, the goods used as security may be worth less.

Banks therefore examine the goods, the people buying them, prices and currencies.

Good financing arrangements are designed to keep the trade moving even when conditions change.

Key facts

Publication date: August 22, 2026
Brent crude movement: Brent crude rose from $61 a barrel at the beginning of 2026 to $118 by the end of the first quarter, according to the article.
Urea prices: Urea increased from about $400 a tonne to more than $850 in April before falling to $453 in June.
Steel scrap prices: The US iron and steel scrap price index was 11.4% higher year-on-year in July and experienced monthly swings.
Coal example: A proposed Indonesian thermal-coal transaction faced foreign-exchange restrictions, a letter-of-credit requirement, ESG restrictions and buyer-country risk.
Core financing risks: The article identifies credit, commodity, price and currency risk as the four main moving risks in commodity finance.
Financing constraint: A fixed credit line finances fewer tonnes when commodity prices rise, while delays can keep the same funds locked up longer.

thehindubusinessline.com · 3 weeks ago