The profound shift in the international trading market offers new opportunities and enables the emergence of innovative solutions.
Michel Coquoz – Sector Head Metals & Mining
A profound shift in the world of trading…
Over the last few years we’ve been confronted with a complete overhaul of the international trading sector.
In fact, two factors have greatly altered the working conditions of the trade finance business:
- The new supervisory framework of the Basel III regulation, with much higher equity requirements to cover short-term business, and the decrease in balance-sheets that has led the banks to divestiture in the sector;
- Also, a desire for transparency from public opinion, from the consumer concerned with the origin and traceability of raw materials as well as the conditions in which they’re processed.
These new stakes have caused upheaval in the banking industry, involved in the trading of raw materials, and that has had to rethink and reassess its exposure to risks, not just in terms of credit, but also in terms of corporate social responsibility (CSR).
As a consequence, banks have had to revise their business model and redefine their customer profiles with greater selectivity. The positive upshot of this restructuring is that it’s incited banks to reinvent themselves, to innovate and to renew.
These evolutions, along with the rise of new technologies, the digitalisation of trade finance, have a long-term impact on the business.
… taken into account early-on by BNP Paribas
Indeed, in the Metals & Mining sector, the finance model was mainly focused on the “upstream” aspects, meaning the pre-funding, and the financing of production units (copper, aluminium, etc.) on behalf of traders or producers directly, more often than not located in far-off regions.
Our business credit policy has therefore been refocused on the players in a clearer setting and whose decision centres are closer to the financing centres. In particular traders, distributors, processors, mainly European and involved in ferrous and non-ferrous metals.
We intervene throughout the raw materials supply chain.
Today we assist our customers in their processing operations (refiners, scrap metal recycling into billets/reinforced concrete, production of aluminium foil from aluminium ingots, etc.) and distribution (wholesalers, service centres, etc.) by financing all stages of processing.
With the new STS products (Specialised Trade Solutions), we finance all the added value that our customers bring to the actual economy.
STS offers a variety of products, made to measure for each customer, in particular in Metals & Mining sector. Let’s look at the example of aluminium portage (raw material) for the benefit of a spare parts manufacturer (finished products) for the automobile industry. This product, based upon a risk approach focused on the collateral, enables the players to have a levier effect on their access to funding for their working capital. Given the volatility of these raw materials (the price of copper, for example, went up by almost 20% in one week following the American elections), an integrated solution for price coverage with our own internal hedging structures proves to be particularly appropriate. Other product offers, combining receivables financing, with or without recourse, complete our range of products.
So, STS brings together expert management of collateral and risks with an in-depth knowledge of the raw materials market of several decades.
A Metals & Mining market far less fragmented than in the past, as well as the slow but sure demise of independent traders, justifies our enthusiasm for the European market and our new business orientation.