Mar 22, 2023
Commodity Traders Fear Impact From Bank Crisis
(Bloomberg) -- Welcome to Energy Daily, the Bloomberg newsletter you’ve known as Elements. The name is new, but the mission is the same: to be your guide to the energy and commodities markets powering the economy, leveraging the expertise of Bloomberg journalists around the world. Today, we take a look the reaction from Swiss trading houses to the banking crisis. To get Energy Daily in your inbox, you can sign up here.
Trading houses in Switzerland are voicing concerns that the takeover of Credit Suisse Group AG could have a negative impact on their industry.
Major Swiss banks have played a key role in establishing the country as one of the world’s biggest commodities hubs, providing firms with vital credit to procure, store and transport raw materials.
At the FT Commodities Global Summit in Lausanne this week, there’s fear that the recent financial turbulence and the combination of the nation’s two largest banks could restrict those services for smaller traders.
“Genuinely it’s not something we see as a positive at all, anything like this where it impacts the commodity space,” said Craig Dean, the boss of major metals trader Gerald Group. “Credit Suisse is a good commodity bank for us, and we’re hopeful that they just don’t go away.”
If there is an impact, it will be uneven. The largest independent trading houses have access to internationally diverse financial resources. Trafigura Group, for example, has said it used 140 banks in its 2022 financial year.
But smaller players tend to rely on a clutch of key relationships. In the hubs of Geneva, Zug and Lausanne, Credit Suisse, UBS Group AG and the country’s cantonal banks provide a significant chunk of traders’ lines of credit.
“I’m probably more concerned on the trading side for smaller, niche traders or more generally for SME companies in Switzerland which typically rely on those two banks,” said Mercuria Group’s finance chief, Guillaume Vermersch. “They may be more on the spot in the coming few months.”
The availability of trade finance had already diminished over the past few years as major providers ABN Amro Bank NV and BNP Paribas SA pulled back from the sector. With recent consolidation among commodity banks, the loss of Credit Suisse could bring more problems for the smaller trading firms.
--Archie Hunter, Bloomberg News
Chart of the Day
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--With assistance from Stephen Stapczynski and Liezel Hill.
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