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Commodities: Structured Trade & Commodity Finance

The word “structured” is an amazing word because it adds so much OOMPH into the description of something. That said, structured trade & commodity finance sounds like a mouthful but it really isn’t that much of a rocket science.

This is an industry which is growing in Singapore, with many foreign banks having set up shop in Singapore since the 1970s and even the local banks having a decent market share of this industry today.

  1. What this basically is

Commodities are being traded across the globe all the time, due to geographical advantages for cultivating and production of different types of commodities, and the comparative advantages (Economics 101). For example, oil is produced from oil rich regions blessed with such resources. Soft agricultural products like rice, maze, wheat, corn are typically produced in “backward” countries where labor and land is cheap (Brazil, Argentina, Indonesia, etc).

As a result of this diversity of origination, trade happens all the time. Country A sells to Country B, and Country C sells to Country D for different products. This is where Trade Finance comes in, which is the facilities of trading activities between different companies from different countries, with the involvement of banks guaranteeing and facilitating trades occurring. If not for banks, there would be trust issues arising from performance risks, with defaults surely to occur and this would hinder all trading activities and volumes worldwide.

Top-5-oil-producing-countries-of-the-world

  1. How are the job prospects in this industry 

Banks generally have a small to mid sized set up for Trade Finance in the Commodities industry. Teams of almost equal proportions are set up in a 1) Back Office for operational matters 2) Middle Office for Risk Monitoring and 3) Front Office for the origination of business. Given that banks in Asia have been doing pretty well in the commodity sector in the past 5 years, we are seeing more job opportunities at the moment with many banks (both local and european) constantly increasing headcount. This scenario is a far cry from the Investment Banking sector, which has been cutting headcount and rolling heads of late.

  1. How the Pay is 

As per most other businesses, the front office staff typicality get the bigger chunk of the pie in terms of remuneration, followed by the middle and then back office. European banks typically pay 20-50% better than local banks at a junior level across the 3 offices. That said, top management pay is usually more “level” once you hit those positions. A Director could/should be drawing a pay of SGD200k a year without bonus, and ages do start from 36 years old on to hit such ranks.

  1. All about Commodities and Trade Finance 

Give that this is my bread and butter, I will be writing COUNTLESS posts on Trade Finance in the next few posts. Intermittently though, please feel free to catch up on my cooking journey where I try to be a local master chef 🙂 or not. Lol.

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