Trade finance volumes hit new low

Trade finance volumes hit new low

Trade finance activity fell to a new low in the fourth quarter of 2011, according to new data from Dealogic.

Just 137 deals were recorded in the final quarter of last year, the lowest level seen since Q1 in 2004 when just 113 deals were closed.

The decline reflects the growing uncertainty surrounding the eurozone crisis seen towards the end of the year. Many banks, particularly European banks struggling with exposure to sovereign debt and increased funding costs, began to retreat from commodity and trade finance markets.

In contrast, the first nine months of 2011 were far more successful, ensuring that a total US$168.6bn-worth of deals were signed during the course of the year; the second highest level on record behind 2010.

The largest trade finance loan signed last year was the Barzan Gas Co transaction; a US$6.7bn facility raised to support the Barzan gas field in Qatar.

The deal included ECA-backed tranches featuring the support of Italy’s Sace, Korea’s Kexim, the Japan Bank for International Cooperation and Japan’s Nippon Export and Investment Insurance.

Overall ECA activity soared in 2011, with guarantees reaching a record 409 deals, up 10% on 2010.

In terms of the volume of ECA deals, 2011 saw a slight decrease of 2% falling to US$68bn from a record US$69.2bn signed in 2010.

Citi topped the ECA-backed trade finance loan ranking having signed US$4.8bn-worth of deals. HSBC came a close second with US$4.2bn.

The American bank also topped the global trade finance ranking, which includes sole bank loans, taking a 6.5% share of the market.

In contrast to the ECA market, pre-export finance loan volumes fell in Q4 2011. A total of US$2.9bn-worth of deals were signed in the final quarter, marking the lowest quarterly volume since the second quarter of 2010 (US$2.6bn).

Yet, the overall volume for 2011 reached US$20.5bn, the fourth largest annual volume on record.

For the third year running, borrowers in the oil and gas sector accounted for 22% of the trade finance volume with US$36.7bn in 2011. The aerospace sector saw the highest volume increase of the top ten sectors, with volumes up 285% to US$5.4bn in 2011, compared to US$1.4bn in 2010.

Russia continued to be the biggest borrower of trade finance, accounting for 16% of the market volume with US$26.4bn in 2011, up 22% on 2010.

Turkey and Brazil were also very active markets in 2011, recording US$19.1bn and US$11.3bn-worth of deals respectively.