Commodity trade finance house of the year: Macquarie Group

In recent years, access to reliable working capital has become increasingly more challenging for commodities market participants and, when coupled with heightened market volatility, has meant that capitalising on market dislocations in physical trading markets has been more difficult than ever. When overlayed with supply chain bottlenecks and logistical constraints, markets have been more strenuous to navigate. Macquarie helps clients steer through turbulent conditions by providing physical and financial access to markets to mitigate risk, provide working capital and de-risk physical supply chains. This differentiated offering for its clients has set Macquarie apart. 

“We can help our customers with this challenge because we have the capabilities of both a bank and physical commodities trader,” says Rohan Westcott, head of commodity finance for Asia-Pacific, commodities and global markets, based in Singapore. “We are a trusted counterparty in the market and relied on to warehouse and manage asset risks, market risks and credit risks, utilising in-house industry expertise and sound risk management practices to be a responsible custodian and partner for our clients.” 

He continues: “Our differentiated service offering means we are able to continue providing liquidity at a time when other participants are scaling back, as we assess the value and integrity of the whole trade flow, rather than just focusing on the credit risk of the counterparties involved.”

Macquarie has been involved in commodities markets for more than 40 years, allowing the group to build extensive commodities knowledge and expertise. It has also enabled Macquarie to introduce greater versatility into the solutions it offers.

“We can start by issuing a documentary letter of credit, on behalf of our customer, to their supplier. We have the option to buy a customer’s cargo and take ownership of the goods, arranging freight and insurance for the transit. When it comes to final cargo delivery, our clients can utilise the proceeds from their buyer’s sales contract to settle amounts due,” says Westcott. “We feel it provides our clients access to a unique suite of solutions that can only be accessed by combining physical and financial commodities structuring and execution capabilities.” 

Niches

Macquarie’s deep commodities expertise means the commodities group is well placed to look for niche opportunities, such as in the emerging battery material ecosystem.

“The energy transition means there is now a greater focus on the underlying metals used in batteries, such as copper, cobalt and nickel,” says Westcott. “Working capital is required from the start of a supply chain, but these metals are in a less refined form. We handle refined and exchange-deliverable commodities – and our industry expertise means we can also provide solutions throughout a customer’s supply chain.”

Macquarie also plays a role in agricultural financing. Grains and oilseeds have formed the base of this effort, but Macquarie provides cattle financing as well. The recent merging of the global oil and agricultural businesses in Macquarie, along with international sustainability and carbon certification, will drive further investment in capabilities in biofuels and agricultural waste products, which are imperative in the energy transition for transport fuels.
 

Scale and complexity

Macquarie’s global reach and ability to solve challenging problems for clients is key to its success. A recent example is the financing of an oil refinery in South-east Asia, where Macquarie facilitates the global purchase of crude oil for this asset and has partnered with it since 2021.

Macquarie’s understanding of the customer’s business meant a solution could be provided that matched the client’s working capital needs for the refinery as soon as the unit began operations. 

“Forging long-standing partnerships with clients where we can understand and value each other’s strengths is imperative to a close and open working relationship,” says Westcott. “We’re incredibly grateful they choose to partner with us and to navigate volatile commodities markets together.”