2020 introduced many challenges across most markets and trade finance was no exception. Trade finance is critical to global companies for support of operations and to enable the expansion of trade and growth.
The COVID-19 pandemic fueled a growing funding gap and exposed supply chain vulnerabilities, with real economy participants pressured to seek alternative funding sources. The $21+ billion liquidity gap left by ABN AMRO (who joined the likes of BNP Paribas, Société Générale, Natixis, and ANZ who had either exited or halted fresh financing in trade and commodities) presents a more challenging future for those mid-tier and small commodity traders who lack a strong presence in a niche market.
Meanwhile 2021 has brought on a commodities price boom that has led to much commentary from traders, analysts and media of a new commodities supercycle similar to 2004 and 2011, when prices were driven by demand from China. This post-pandemic surge increased demand across the board, coupled with an uptick in demand for base metal requirements associated with the green energy transition.
The trade finance market will continue to evolve quickly, and there will be no shortage of opportunity for new institutional investors to meet the economy’s growing demand for trade finance solutions. New entrants will be smaller, more nimble focused experts in specific commodity markets.
The challenges of 2020 brought around the initial steps in the long needed digitization of commodity trade moving many manual, paper work flows to automated, electronic platforms. As new trade finance investors fill the void left by the banks, new systems and process will need to be implemented quickly, further accelerating the digitization of the commodity markets.
A cloud native CTRM solution is the preferred route to navigate these chartered waters. If you’re thinking about transforming your trade finance operations, speak to a CTRMCloud specialist today and see how we can help.
CTRMCloud offers CTRM as a service, allowing for data to be collected, analyzed and reported in near real time from all areas of the business. Contact us to learn more.