Commodity Finance : Principles and Practice / Weixin Huang.

Format:

Book

Author/Creator:

Huang, Weixin, 1948- author.

Language:

English

Subjects (All):

International trade--Finance.

International trade.

International finance.

Banks and banking, International.

Commodity futures.

Physical Description:

1 online resource (278 pages)

Edition:

Second edition.

Place of Publication:

Petersfield, Hampshire, England : Harriman House Ltd, [2019]

Summary:

Very few books published so far have touched upon commodity finance and fewer still have provided a systematic explanation and analysis of the subject. It is however a subject that is relevant throughout almost every corner of the world. From food to gold, commodities are ubiquitous.In this book, Dr. W. Huang, a practitioner and a trainer, covers commodities, commodity markets, commodity trade and the finance of commodity trade. As such, practitioners such as bankers and traders in commodity finance, and those institutions operating in this field, or planning to be active in this field, will all benefit from this book.This revised and updated second edition is a hands-on summary of commodity finance, with a special chapter dedicated to real-life case studies of commodity finance.Topics covered include:- High-level overview of commodity trade and finance.- The three major sectors of commodity finance: soft commodities, hard commodities and energy.- Commodity finance and emerging markets, as most commodity export countries are emerging markets countries.- The special mechanisms and products of commodity finance, from plain vanilla products to more complicated structures. The concept of Supply Chain Finance is also covered in detail.- Bank and country risk.- Risk management principles, with practical case studies.- The organization of a typical commodity finance bank.The key benefits of the book are: For bankers - how to do business and what risks should be watched for? For traders, brokers and institutional investors - how commodity finance is done and what bank instruments can be used. For students - how is commodity finance handled and developed by banks?Each chapter can be read independently. The content has been reviewed by both experts and newcomers, incorporating their comments on style and content, to ensure it is as useful and clear as possible.

Contents:

Intro

Contents

Edition note

Praise

Acknowledgements

About the author

Foreword by Lex Kloosterman

List of abbreviations

Introduction

Structure and logic

Why and how

Target readers

Chapter 1

Commodity Finance: Definition and Scope

Definition: commodities, commodity trade and commodity trade finance

Characteristics of commodity trade

Commodity markets and commodity exchanges

Commodity trade finance

Marketability of commodities

Leverage finance

Emerging market linked

Pre-export production

Production

Post-production

Chapter 2

Commodity Finance: Commodity Flow and Emerging Markets

Commodity flow: a global overview

Soft commodities

Hard commodities

Energy

Financing commodity flow for the least-developed emerging markets

Commodity finance: the importance and the difficulties for some less-developed emerging markets

Guarantee funds for credit support in commodity finance

Other instruments

Commodity finance for commodity dependent countries: the case of Ethiopia - why and how

Background

The financial sector in Ethiopia

Commodity finance

The role of micro-financial institutions in commodity finance

Support from the government for commodity finance

Some implications for the case

Contracts and documents behind the commodity flow

The importance of contracts and documents

Major parts of a commodity contract and points of attention

Chapter 3

Commodity Finance: The Major Financing Mechanisms and Products

Plain vanilla products: commodity finance versus trade finance

Commodity finance: finance under a letter of credit

Commodity finance facilities: pre-export finance

Export receivables financing

Prepayment finance

Advantages for the lending bank and the borrower

Related risks under pre-export finance.

Trade finance facilities: ownership-based finance

Ownership-based finance

Different forms of ownership-based finance

Advantages of ownership-based finance for the lending banks and the borrowers

Relevant issues on ownership-based finance

The risk issue

The legal registration issue

True sale issue

Liquidity of the commodities involved

Issues linked to a special category of commodity

Supply chain finance

Supply chain finance: the concept

Advantages of supply chain finance solutions for the lending banks and the borrowers

Risks involved with supply chain finance

Supply chain finance application: a case of supply chain finance for copper

Chapter 4

Country Risk and Bank Risk and Letters of Credit in Commodity Finance

Country risk and bank risk

Practical issues for country risk in a commodity finance bank

Assessment of the country risk

The bank's strategy towards that country

Commercial motivation

Bank risk in commodity finance

Practical issues for bank risk in commodity finance

Banks without external credit rating

Limit size and business need

Bank limit utilization and the speed of credit approval

Letters of credit in commodity finance

Letters of credit as a payment undertaking

Letters of credit as an instrument for financing

Bank risk for emerging market banks: payment dispute and delay

Chapter 5

Commodity Finance and Risk Management

Multiple risks and risk analysis in commodity finance

Commodity finance and its multiple risks

Financing commodity trading companies: multiple risk management

Risk management in commodity finance: the supply chain approach

Risk management in commodity finance: the collateral management approach

Principles of collateral management

Considerations on risk management for warehouse finance.

Risk management in commodity finance: the instrumental approach

Risk coverage instruments

Fraud risk in commodity finance

Fraud risk and its impact

Considerations in fraud risk management

Defaults and bad debts management for commodity finance

Case appraisal and solution search

Litigation

Debt sale and debt collection

Chapter 6

Commodity Finance and its Infrastructure

The organizational infrastructure of commodity finance in a bank

Front desk: relationship management

Credit analysis team

Risk management team

Commodity support group

Financial institutions

Credit approval department

Legal department

Bank analysis department

Country risk analysis department

Industry research department

Corporate social responsibility department

Commodity price hedging desk

Commodity finance and commodity market research

Commodity finance: the support group and the trade service department

Special competence for the trade service department

Commodity finance, global market operation and price hedging

Special competence for global financial markets department

Commodity finance, risk appetite and credit mentality

Special competence for the credit department

Commodity finance and financial institutions

Special competence for the financial institution department

Chapter 7

Commodity Finance: Trends and Outlook

The future of commodity finance

Commodity finance and the commodity cycle

Demand from Asian countries, especially China and India

Population growth

Export restrictions

Other factors

Commodities and investment in commodities

Investment in commodities

Investment motivation

Commodity finance along the supply chain

Commodity finance and environmental protection

Conclusion

Chapter 8

Commodity Finance Case Studies.

Pre-export finance

Executive summary

Case study - Bank M

Haana Cocoa Board

Payment blocked by a local court

Commodity fraud

Financing of railway bills

Court decision

Appendix 1

Major Commodity Futures Agencies

Agencies for commodity risk hedge

Appendix 2

Major Commodity Flows for China During Peak Years

Appendix 3

Top Commodity Trading Companies Worldwide

Bibliography

Publishing details.

Notes:

Description based on print version record.

Includes bibliographical references.

ISBN:

9780857196668

0857196669