Despite the continued impact of the pandemic, the disruption to global supply chains and the transformative effect of technology on trade and trade finance, GTR’s most-read stories of 2021 focused on the commodity finance sector.
In some cases, the most popular stories – as measured by page views – were outlier events. In one example, we covered an alleged billion-dollar nickel trading scam in Singapore, where a director of the Envy Group has been accused of running a four-year-long investment fraud scheme involving the purported trading of nickel, with our article centring on the consequences for investors.
Other stories that drew in large numbers of readers include our report on the alleged role of a Singapore oil trader in an import network used by North Korea to bypass UN sanctions, as well as a major European bank’s decision to terminate commodity finance operations in certain markets, which followed similar announcements made by other lenders the year before.
The considerable interest in these stories might suggest that while the industry has largely moved on from the high-profile commodity fraud cases of 2020, the finance sector is keen to ensure that lessons are learned to avoid a repeat of past mistakes.
This publication, our annual Commodities Issue, provides us with an opportunity to take a closer look at some of these trends.
One of the dominant narratives, in part triggered by the bout of fraud scandals that emerged two years ago, has been the so-called ‘flight to quality’, as banks seek less risk by focusing on larger trading companies – often to the detriment of smaller borrowers.
In this issue, our feature titled Collateral damage reviews the extent to which fraud risk could be mitigated by ramping up warehouse inspections and other goods checks, and whether such a move could ultimately open up more financing to SMEs.
Elsewhere, our fintech feature pursues the matter of dodgy dealings, and examines the reasons why technology – which is successfully transforming so many areas of the trade finance ecosystem – has not yet been harnessed to solve commodity finance’s fraud troubles through the digitalisation of warehouse receipts.
This publication also presents an investigative deep dive into beleaguered metals tycoon Sanjeev Gupta’s former trading business, Liberty Commodities, and its use of related-party transactions – structures which appear to be of increasing concern to the financing community. Our report includes an in-depth probe into the inner workings of a metals trade involving numerous Gupta-linked companies.
We round out our coverage of commodities themes with an examination of how the sector is being impacted by the transition to renewable energy sources. One report focuses on hydrogen, examining the acceleration of investment and policy backing as global demand increases, while another – at the other end of the spectrum – looks at coal, now facing an existential crisis in developing markets.