Take a cross-border commodity deal where a large trader is ready to pay in full for a shipment of thermal coal from Indonesia. On paper, the transaction looks straightforward. But even with the money available, the deal may still not go through.
In this case, the seller explained that local foreign-exchange requirements meant only half of the remittance would be immediately available; the rest would be released later. The supplier insisted on a letter of credit. That opened a second problem. Several lenders had ESG restrictions on thermal coal. The final buyer is a power utility in another country, so its credit and the country risk had to be assessed.
The financing was arranged on the trader’s balance sheet, scale and reputation. The lesson: a trade can have cash, real goods and a government buyer — and still not be bankable.
Price is only the first shock
Brent crude began 2026 at $61 a barrel and ended the first quarter at $118. Urea moved from about $400 a tonne to more than $850 in April, before falling to $453 in June. The US iron and steel scrap price index was 11.4 per cent higher year-on-year in July, after monthly swings.
These movements do not stay inside one market. Disruption in West Asia affected crude, fertilisers and petrochemical feedstocks. Geography adds another layer of risk. Indonesia is the world’s largest thermal-coal exporter, while production or policy changes in origins such as Iran and Egypt can quickly reshape fertiliser supply and pricing.
The pistachio situation in California shows how far the impact can travel. Industry estimates suggest the 2026 crop could be less than half the record 2025 output. The pressure will move from growers and nut traders to ice-cream, confectionery and other food manufacturers.
What a bank is really financing
Commodity finance is not simply a loan against goods. It is finance against four moving risks.
Credit risk begins with the buyer: its financial strength, payment record and reputation. Commodity risk concerns the product itself: whether it is perishable, how long it can be stored, whether quality may fall and whether another buyer exists. Price risk can be severe even when goods do not spoil. Scrap metal may remain usable for years, but its value can change sharply while it is at sea or in a warehouse. Currency risk arises when purchase, sale and funding are in different currencies.
In my experience, many Indian banks are more comfortable with manufacturing and processing, where assets and value addition are visible. Many European lenders are more familiar with financing pure trading. Both, however, need confidence that the cash cycle will close.
Profit does not guarantee liquidity
The financing need is price multiplied by volume and time. A fixed credit line does not expand when a commodity becomes costlier; it finances fewer tonnes. If shipping, inspection or buyer payment also takes longer, the same money remains locked for more days. If prices fall, the value of inventory offered as collateral may fall with them, forcing the borrower to provide more cash or security.
Commodity finance must, therefore, be structured for movement, not for a stable market. Lenders and businesses must test what happens if an origin changes its policy, a currency weakens, a cargo is delayed, a buyer pays late or the price moves before delivery.
The best structures cannot predict every shock; they create enough visibility, controls and liquidity to absorb one.
In volatile markets, profit is only the first test. The decisive test is whether the financing structure can carry both the goods and the money through the entire journey. A profitable trade that cannot be financed is not a trade at all.
The author is Founder and CEO of Globizera, a Dubai-headquartered bespoke working-capital solutions provider supporting companies across Southeast Asia, the Middle East and Africa.