The Business Times has recently interviewed Ailing Huang, Kerry Consulting’s associate director of energy, commodities and financial services, to share her views on the potential held within Inventory Financing while commodities business for banks has been struggling in the past few years.
According to Ailing, ‘due to increased regulatory and operating costs, banks were seen unwinding their commodities’ trading books or putting up businesses for sale. As such, we have seen an increase in the supply of candidates to the market.’
There is, however, a mismatch in supply and demand – those with physical commodities trading expertise are still in “general shortage. With inventory financing, one of the rare bright spots in the gloom surrounding commodities markets, professionals with expertise in structured inventory financing transactions are in demand as well.
“One of the main drivers for banks in commodities is inventory financing. That business actually did quite well in 2013,” said Paul Johnny, a research director at industry analytics firm Coalition. “Seventy per cent of all inventory financing happens in Asia. People think that will continue to thrive.”
With commodity hedge funds also struggling, commodity trading houses have been the only ones expanding. As the trend of trading houses spreading themselves across the value chain and buying upstream and downstream assets to boost profit margins continues, however, the positions they look to fill are not for traders, but for business development and commercial functions.