The Trade Finance team in Trafigura is a key department within the Group. The ability to both raise liquidity from our financial partners and mitigate credit and performance exposure of our trading counterparties are key responsibilities for any successful company.
The Trade Finance team has many key partners, including but not limited to, our external Banking & Insurance partners, external counterparties, Traders, Operations, Deals Desk, Tax, Treasury, Credit, Compliance.
On a daily basis the Trade Finance team performs a number of tasks, such as:
- The issuance of Letters of Credit and Bank Guarantees for the Company’s purchases of crude and oil products and ensuring that both cargoes and storage facilities are financed and insured in a timely manner.
- Overseeing analysis, monitoring, mitigation and awareness of the Company's financial risks.
- Ensuring compliance with storage and commercial contracts in protecting the Company’s interests.
- Making appropriate finance decisions, including overseeing cost effectiveness, diversity of financing sources, and minimum use of the Company's own liquidity.
- Providing guidance to Finance Officers and Traders in difficult or unfamiliar situations.
- Carrying responsibility for the maintenance of the regional bank lines as well as serving as the Company's main liaison with our Banking partners.
- Overseeing that the Company is not exposed to risks associated with the OFAC regulations in force at any time.
- Working with Deals Desk personnel to ensure any incurred costs agreed by Trade Finance are allocated correctly to the separately maintained deal Profit & Loss accounts.
To fully master the role takes years of training as it requires an in-depth knowledge of every element of physical trading, the counterparties we trade with, and any regional specific issues regarding security and risk. It is essential to maintain a flow of communication with all key partners as deal specifics can change hour by hour, day by day.
Meet one of our Operations Managers for Concentrates
Meet one of our Operations Managers for Concentrates05 April 2016
A day in the life of a trade finance analyst
Trade finance analyst
Country: USA - Houston
Education: University of Houston – BBA in Finance
History: Started in Houston Treasury
Alarm disrupts my sleep but it’s time to get up! Check my blackberry to make sure any emails from Geneva, Mumbai, or Singapore have not come through during the night that needs to be addressed promptly. Time to get ready and head to the office, luckily I live about 10 minutes away so the commute is short and quick.
In the office, I sit next to the other eight members of our Houston Trade Finance team with decades of industry and Trafigura experience combined. The team has great chemistry and a lot of knowledge, not a day goes by where I do not learn something new or experience a brand new scenario that needs a unique solution.
First things first, go through all my emails and check in with my operators to see if any prompt purchases or sales have come up that need to be handled immediately. Looks like this Friday might actually be a quiet one as there is nothing new to report.
An email just came through with the latest scheduled Pipeline cycle for Gas Oil so I will need to arrange for a bank to finance it. I will have to forecast the exposure I will have on the cycle and choose a bank with apetite to manage the cycle. I ask my team what business they currently have and expect to have at certain banks to make sure we do not run into any issues. Looks like we’ve bought from a few counterparties that do not offer open credit so I’ll need to project the amount of line I will need to post letters of credit for those. We are also selling to several counterparties that I will require security prior to delivery of product, so I make sure to note those trades and reach out to their credit departments.
I’ve negotiated with a bank to finance the cycle. Time to draft a pledge agreement.
We recently agreed terms on a new storage tank to stock products, based on the business strategy of the product, and where we have been financing most of barrels purchased, I approached a specific bank with the storage agreement to discuss the financing. Originally sent the documents last week and the contract is set to begin Monday, so I chased up the bank to see if the process is moving along. Looks like they needed legal counsel but have agreed to finance the new storage. Good news, need to alert my operator.
Operations have submitted about 25 payments for tomorrow, will need to review each to ensure we have been invoiced correctly, make sure we cancel the letters of credits associated with the purchases, and provide finance approval so Treasury can remit the payments to our counterparties. There are quite a few today so I need to approve them soon, Treasury will need time to set them up for Monday morning.
Have a lunch meeting with our pipeline operator, it is a good idea to keep in constant contact with operators and traders in order to keep up to date with new business. When I know things are coming up on the horizon, I can approach banks and keep them up to date of potential situations. Appears we have some new product business that will begin over the next two months so I am taking notes and getting an idea of how the business will operate to see how we will finance it.
Just received a message from our operator and it looks like we have a prompt trade that will load over the weekend. We are purchasing from a counterparty that will require a letter of credit, loading a vessel that will ship to South America, and discharging in Ecuador. It is already 1:30pm on a Friday in New York, so I need to get a hold of someone at the banks to see who would be the quickest to finance the deal. If they cannot get a letter of credit issued today, the counterparty will likely refuse to load the product to our vessel so I have to make this work.
A bank accepts to finance the deal. Need to draft a pledge agreement outlining the purchase and sale, draft a letter of credit for the bank to issue, and advise our operator to get the bills of lading consigned or endorsed correctly. As the vessel will discharge in South America, the bills of lading will most likely be needed for customs purposes so I need to make sure that gets done correctly. It is down to the wire as the banks have internal cut offs and I need to provide everything necessary to perfect the bank’s security interest and provide them with enough time to issue the letter of credit. If that cannot be done, all this work will go to waste and we will not be able to load product on our vessel over the weekend.
The bank has called inquiring about the new storage tank they’ve agreed to finance. They have a couple questions as to how we will report weekly inventory to them and where the product will be sourced from. We’ve agreed to submit a market to market report to the bank that will update our inventory by the current prices on a weekly basis. It is important to work with the banks to come to an agreement that leaves both parties satisfied and comfortable.
Just received the letter of credit for the product loading this weekend! I’ve forwarded it to the counterparty we are purchasing from and we are ok to load from them. Crisis averted. It is important to keep an open and healthy relationship with both the banks and counterparties when situations like this arise. An important aspect of Trade Finance is being the “middle man” between traders, counterparties, and financing banks and keeping an open line of communication with everyone.
The letters of credit that I have requested for sales to other counterparties due today are starting to come in. It is important to review them line by line to ensure they are valid and cashable. If there are any errors or items missing, I will need to request the counterparty who issued to revise as soon as possible to ensure the LC is cashable prior to the risk date of the trade.
The day is finally winding down, I have received all my LCs for the day and everything was issued on time. Scan my emails and tasks flagged to make sure nothing has been missed.
A day in the life of a Trade finance officer
Trade finance officer
Country: Singapore - Singapore
Education: SMU – BSc Finance and Economics
History: Joined the trade finance team 11 months ago
Interests: Hiking, Running
Wake up and see the blinking red light of my Blackberry greeting me. I scroll through the mountain of mails to search for any relevant/urgent mails that require my immediate attention. Red flags for urgent, blue for later this afternoon. Shower and head into office.
On the way to work, my products trader calls and tells me he wants to enter a 100 mio USD bid.
As the product traders shout out figures and major news headlines, predicting market movements and forecasts, I furiously scribble down notes.
Lunch. I make my way down for a lunch appointment with one of our banks. I mentally remind myself how important it is to build and maintain good relationships with the banks, who we work closely with on a daily basis. During lunch, the bank pitches new products while we negotiate lower rates and keep them up to date with our current market strategy and storage expansion plans in our new key markets.
It’s the time of the day again where I prepare financial security documents to ensure we get paid. One counterparty issues a Documentary LC 3 mio USD less, pricing off current month, and because the market is heavily contango I need to deploy my best negotiating skill in order to get a positive outcome. Another bank wants to discuss discrepancies in the documents I presented, eventually I manage to convince them that the Trafigura position is correct and they come to an agreement.
Just as I get up to grab another coffee, I received a complicated Doc LC from a counterparty. With the clock ticking, our vessel tendering NOR, possible demurrage costs running 50K a day, and an impatient client, I explain to my trader, manager, and operations team the financial risks and what actions have already been taken to protect our position.
Once the flurry of the day has slowed down, I finally have time to focus on reviewing ongoing trades, trade contracts and to lay out what has to be completed the next trading day.
Send out one last e-mail, reminding my bank on an upcoming due diligence trip to visit a floating storage next week
A day in the life of a graduate
Rotation 1 - graduate
Country: Shanghai - China
Education: Shandong University – BSc Finance
History: Started in Shanghai on the graduate programme
Interests: Tennis, Travelling
Walking through the trading floor in the morning one can feel the buzz as everyone is preparing for the trading day ahead. First thing on my agenda is to check if there are any new trades with prompt loading/deliveries that require urgent attention.
Liaise closely with traders and our operations team to get a clear understanding of our future and current trades. This includes aspects such as sale intentions and any shipment details that could affect how we finance the deal and what security we use.
Once I have a clear understanding of upcoming trades I will contact our financing bank to place deals. Clearly communicate trade details and negotiating rates.
Lunch with one of our financing banks. Discuss current trades and hear what the banks can offer us. As we work very closely with our banks on a daily basis, it is important to build and maintain good relationships.
Prepare and send security documents such as Standby/Documentary Letter of Credits and Parent Company Guarantees to our counterparties. This may sometimes require negotiation with the counterparty regarding the wording of the security documents to make sure that Trafigura has financial security (i.e we will get paid) and that trade will take place smoothly.
Prepare and send invoices to issuing bank.
Focus on cargo financing and external reporting for the two storage terminals I am responsible for. This includes marking product in tanks to current product prices and communicating the discharge and loading operations to our financing banks.
Once the tempo has slowed down I have time to focus on housekeeping which includes updating internal system, review and comment on new trade contracts and prepare for the next trading day.
Meet financing bank and/or Trafigura colleagues.