20 November 2019
Discover our Agribusiness expert Alain Butler’s insights on the cotton industry.
Who are the main producers of cotton? What is it mostly used for ?
Discover almost all you have to know about cotton.
4 July 2019
Who are the main producers of rapeseed? Who exports the most? What does rapeseed oil represent for the biodiesel market?
Discover almost all you have to know about rapeseed.
21 May 2019
Who consumes the most wheat, humans or animals? Which countries run the market? Discover almost all you have to know on wheat.
20 May 2019
Don’t blame the technology; the real hurdles are governance, responsibilities and the ability to embrace change.
When taking a closer look, the execution of commodity trading may appear outdated to people unfamiliar with the industry. Handling paper documents remains the basis of transactions, and lots of time and energy are invested in reconciling information between the parties or internally between various IT tools.
Within the trade finance industry, most people would agree that transacting via data only would be easier, quicker and cheaper. Avoiding redundancies of data and interfacing tools should save costs. We at last see more potential integration between the post-trade executions of commodity merchants and the financing of those transactions. The challenge is not about sharing a common long-term vision, but implementing the first steps to reach it.
As with social networks, blockchain projects will add value to users once many of them are interconnected. For instance, replacing the means of communication between banks for documentary credit by a blockchain solution requires a minimum adoption by a pool of banks. By developing komgo, Voltron or Marco Polo in consortia, banks address this network effect requirement.
Defining the appropriate governance of such a structure is another challenge. From a regulatory standpoint, it must comply with competition laws. On the economic side, their business models encroach on the bank origination and distribution. Over time, we can also imagine a divergence of interests between the parties involved.
Unfortunately, the whole transaction process involving many parties cannot be digitised at once, so we have to start somewhere and then manage the rupture. At some point, the new processes need to be plugged into the existing ones. This raises new questions, for instance, how do you produce a paper version of the shipping documents if your client has purchased a digital set of shipping documents, but his buyer is only willing to receive a set of paper documents? Here, the idea is to define a set of rules and responsibilities that are new and agreed upon by the parties to manage the boundaries.
Ultimately, those digital platforms need to be interfaced with the banks’ “legacy”. The banking industry was once one of the first to be computerised and therefore their IT systems beat the life expectancy of those in most industries. Considering the implementation cost of such connections, banks have to arbitrate between its resources, the various possible platforms, and the remaining shelf-life of the tools to be connected.
Rome was not built in a day and trade finance will not be digitised overnight. Embracing the agile and lean methodologies and involving users within the design process of IT tools has already accelerated the time-to-market for the delivery. It has also ensured a better design through a simpler communication between users and developers. While it is critical for banks to manage their cost structure to remain competitive in a fast evolving world, they also need to be connected to their clients. Now it is time to roll up the sleeves and start implementing these new platforms and adapting to new challenges on the way.
Article written by Louis-Jérôme Monnier, Origination & structuring manager agribusiness, BNP Paribas in Switzerland. Published in Agefi’s special edition on commodities on April 2019.
27 March 2019
From March 18th, Ariane Dehn is appointed Head of BNP Paribas Asset Management in Switzerland.
Ariane Dehn, as Country Head Switzerland Asset Management, is responsible for distribution of active as well as passive Asset Management Solutions.
Prior to her recent appointment within BNP Paribas, she had worked since 2001 for Janus Henderson Investors in various positions in Germany and Switzerland. In her last role, she was Head of Sales Germanic Switzerland and Austria responsible for Wholesale and Institutional Clients.
She hold the degree as Qualified Insurance Specialist and certified Hedgefund Adviser.
“I am glad to join BNP Paribas Asset Management because of the strong leadership in ESG and the quality of the product range”
She will report directly to Fabien Madar, Co-Head of Distribution Europe, Head of Southern Europe in BNP Paribas Asset Management.
“I am very proud to welcome Ariane. She is bringing with her a deep knowledge of the Swiss market which is the most important ingredient to build trust with our clients”
11 March 2019
To meet national and international environmental targets, car manufacturers have developed alternative fuel-powered cars.
Indeed, many countries have decided to ban the sale of new fossil fuel passenger vehicles by 2030-2040: China, France, Denmark, India, the Netherlands, the United-Kingdom, Norway, and Sweden…
Some cities also signed the Fossil Fuel Free Streets Declaration, committing to ban emitting vehicles by 2030: Auckland, Barcelona, Brussels, Cape Town, Copenhagen, London, Los Angeles, Madrid, Mexico City, Milan, Paris, Rome, and Vancouver… The objective is clear: to reduce carbon emissions coming from fossil fuels – such as gasoline and diesel – that cause climate change.
In this context, three main alternatives to fossil fuel passenger vehicles have emerged: electric vehicles (EVs), fuel-cell electric vehicles (FCEVs) and biofuels.
Biofuels, such as ethanol or biodiesel, are alternative fuels produced directly from biomass (plants or organic wastes). In theory, biofuels are carbon neutral because the carbon dioxide that is absorbed by the plants during its life is more or less equal to the carbon dioxide that is released when the fuel is burned. In addition, biofuels are generally considered as renewable energy as the plants can regrow quickly.
In 2018, the share of biofuels in total transport fuel demand slightly exceeded 3%. Ethanol is the first alternative fuel consumed in the world. Main producers/exporters of biofuels are located in large agricultural countries (Brazil, Argentina, and Indonesia) or in countries with favorable tax treatment regarding biofuels (the US). Continental Europe is the main consumer/importer of biofuel.
Electric vehicles represent a fast growing alternative to fossil fuel vehicles. EVs are using electricity to power an electric motor. The electricity consumed – that can be generated from a wide range of sources, including renewable sources such as solar and wind power – is stored in batteries. Today, most EVs are using lithium-ion batteries because of their high energy and power density, and long life span.
In 2018, global sales of new EVs passed two millions units (+70% more than 2017!), with around 50% of global sales in China. This acceleration is mainly due to the significant cost reductions, improved performance of batteries and government subsidies in some countries like China. Today, China, Europe and the US are leading the way with the largest stock of EVs currently in circulation.
EVs can also use fuel cell, instead of a battery, to power an electric motor. The fuel cell is using oxygen from the air and compressed hydrogen to generate electricity. Converting hydrogen gas into electricity produces only water and heat as a byproduct. If produced from renewable energy (solar, wind for instance), the use of hydrogen allows to fully decarbonize mobility.
As end of 2018, the accumulated sales of fuel cell vehicles worldwide reached 10,000 units. Three FCEVs have been introduced for commercial lease and sale: the Hyundai Nexo, the Honda Clarity and the Toyota Mirai. On average, these models can be refueled in 3 to 5 minutes and feature a range of 500km (c. 300miles). These aspects are widely acclaimed by consumers. However, to develop further the use of FCEVs, infrastructures are key: more hydrogen refueling stations are needed. It is the main challenge today.
The alternatives introduced above will definitely help to decarbonize – at least partially – car mobility. There is a long way to go, but progresses have been made and the pace will accelerate driven by regulation and consumer demand. Given its key role in commodity finance, BNP Paribas can contribute to this acceleration by financing the entire biofuel value-chain (from production to distribution), the components of the lithium-ion batteries (lithium, cobalt, manganese, nickel, and graphite) and by accelerating the development of hydrogen as an energy carrier.
22 October 2018
Contrary to other resources like paper or plastics, metals can be indefinitely recycled with substantial savings (costs, energy as well as CO2 savings) compared to primary production from raw materials. For example, compared with production from raw materials from mines, metal recycling reduces CO2 emissions by 80-95%. Recycling also fosters economic development, as local collecting and recycling facilities create more jobs than sending waste to the incinerator, or worse, to a landfill. With the electrification of the economy, metals play a central role in the energy transition, and new sorting and processing technologies will help to increase the recycling rates of batteries and electronics.
Recycled metals account for between 60% and 90% of most metals production in mature economies (EU, US, Japan), especially as EU and national laws prohibit the export of waste material and force countries to develop a domestic recycling infrastructure. In fast growing countries like China or India, who still rely essentially on raw materials as they have limited accumulated resources to be recycled, the share of scrap is expected to rise rapidly. China, the largest importer of waste in the world, is already taking steps to develop a sustainable and local recycling industry, by enforcing a ban on some waste imports. In a world of finite mineral resources with a global population expected to reach 10 billion by 2050, recycling will be essential to meet demand in a sustainable way. Countries with high recycling rates will gain growing independence from primary metal imports by fostering a local circular economy.
Discover more about BNP Paribas Specialized Trade Solutions
The global energy landscape is evolving at an unprecedented pace. The energy transition towards a less carbonised consumption is a need and a reality, driven by growing environmental awareness of the civil society, an ever more stringent regulatory environment, maturing new markets, new technologies and changing economic fundamentals. These developments are not only impacting traditional energy companies but also a wide range of other industries such as the car industry, the farming industry and even the building sector. We are already witnessing changes in regulations that impact the traditional energy sector such as IMO 2020, RED II or diesel car limitation in western cities. Having the energy transition in mind, we expect to see in the future more regulations and with regulation impacting heavily the market. The IMO revolution is just the prelude to the new world of oil in the next 10-20 years with more and more disruptive regulations to be implemented in the wake of the energy transition This transition has also triggered the emergence of strong Megatrends in Europe: the liberalisation of the power and gas trading in Europe, the optimisation of the energy use or the rise of new energy vector such as hydrogen.
As often, challenges lead to the emergence of new business landscapes, paving the way for new players and new markets:
BNP Paribas is committed to act as an accelerator of the energy transition while continuing to play an important role in ensuring the security of energy supplies. This translates into ever increasing and ambitious commitments towards less carbon intensive energy alternatives while maintaining a strong support to traditional oil players. What can the commodity trade finance industry bring to support this diverse energy ecosystem? What are the challenges and opportunities for various players across the whole spectrum of energies trading? Three companies, each occupying a different niche position in the energy ecosystem, will share with us their insight, ideas and perspectives on these questions and others during our Commodity Days event: a crude oil producer & refiner, a natural gas & power distributor, and a producer & distributor of renewable hydrogen.
Discover more on BNP Paribas Specialized Trade Solutions
The agribusiness industry is at the juncture of trends which have a concrete impact on the way agri-commodities trade finance is being and will be conducted.
The first of these trends is the increasing interest from consumers on the quality and sustainability of food, extending as well to the way it is produced: preservation of water resources, soils, forest and biodiversity, working conditions, restrictions on child-labour… Regarding the quality of the agri-produce itself, the consumer in many countries seeks transparency through labels and certifications and is offered, in mature markets, ways and means to ensure and control traceability throughout the value chain. This trend spreads rapidly in developed markets of Europe, North America and Japan, and among the higher revenues population of emerging countries. In the specific agri-business industry many banks have elaborated and made public a specific agriculture policy which applies on all their agri-financings. Trade finance banks well versed in the transactional financing model have a definite advantage for ensuring traceability as they are used and equipped to follow tightly location and status of the commodities financed, from producing areas to export terminals, high seas and warehouses at destination.
Digitalization is a 2nd trend significantly impacting the way trade finance banks finance agri-commodities. This, in complement to the trend for sustainability, contributes to a possible atomization/fragmentation of markets and flows with diversification of underlyings – as a merchant’s model evolves from volume-driven models to value-driven models. In the search for margins, agri-merchants tend to extend their reach to what used to be considered previously minor-agri commodities (such as pulses and for example which present an extremely wide assortment of names, types and grades). In the more classical commodities, client’s requests for single origins, the development of flows of organic and certified goods and the growing necessity generally to preserve the high quality specifications of the commodities require specific traceable logistics and transportation means to prevent comingling with conventional and /or lower quality commodities. This fragmentation of the flows, driven by customer specific demand for sustainability and traceability is today made possible and further helped by digitalization in issuing, exchanging and processing documents and is bound to go further. In parallel, we observe at the same time a higher use of containers as a way of transportation of the commodities we finance all across the board of our agri-commodities portfolio. Trade finance banks active in the agri-sector finance today transactions which have a lower average value and a lower average volume than few years ago and need to keep adjusting their costs accordingly. Here digitalization and blockchain are the compulsory paths to reduce significantly processing and checking costs associated to the trade financings.
The third trend is the increasing role of the non-bank actors of the value chain in actually distributing financings. This is possible by the combination of available technology (phone-payment systems, specific credit cards systems) with a growing concern from merchants/and agri-food industries in the more labor intensive agri-segments (cotton, coffee, cocoa) on the availability of agri-commodities to sustain their needs. Merchants and industries therefore enter into programs aiming at strengthening their supply chain through a combination of agri-techniques teaching and training, supply of inputs, financing of orchard replanting when necessary – as seen in the cases of cocoa and coffee – and/or cash-partial payments during the growing of the crop which provide the farmer with more regular revenues and makes the farmer activity more rewarding and comparing more favorably to other possible jobs. These programs have also the purpose of an enhanced global quality of the crop, possibly including as a target the meeting of certification criteria. With a prepayment component and some micro-finance aspect and even in some cases a capital expenditures financing component, these programs require specific funding, which, for the capital expenditures, goes beyond the usual one year max time horizon of trade finance. Such longer financings are part of the “farmers management” function that merchants and agro-industries develop progressively and will naturally entail some recourse on the balance-sheet of said corporates. The future is indeed exciting for agri-trade finance banks with leading involvement in the larger sustainability and traceability issues, with the necessity to make full use of digitalization to finance and process more diversified and lower average volume transactions and with growing solicitation for additional types of financings!
Discover more on BNP Paribas Specialized Trade Solutions.
2 October 2018
Who runs the corn production? How much is used for Ethanol and BioFuel? Discover almost all you have to know on Corn.
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