Quote from chief_editor on October 6, 2023, 11:04 am

Welcome to a series of insightful experience sharing sessions from Ian, an accomplished commodity broker who later transitioned into a seasoned trader. Over the years, Ian has navigated the intricate and often unpredictable world of commodities, gaining a wealth of knowledge and on-the-ground experience. Through these narratives, Ian delves deep into the nuances of the trade, debunking myths and highlighting the core principles that have anchored his success. Whether you're an aspiring broker, an emerging trader, or someone interested in the world of commodities, Ian's tales from the trenches offer invaluable lessons and a unique perspective on the industry. Join us as we journey through the highs and lows, the challenges and triumphs, and the lessons learned along the way.

Hello everyone, I'm "Ian". Why are there challenges in maintaining commodity trading, especially in large quantities? Let's discuss. Often, the purchasing party is a state-owned enterprise. These entities, known for their stringent risk control and legal teams, are dominant figures in the trading realm. They typically demand a contract be signed first, followed by the seller presenting the Proof of Product (POP) and Q88, indicating their vessel has already set sail and loaded the goods.

This scenario implies the overseas trading company has most likely fronted all costs. To ensure their commitment, they might ask the domestic buyer to issue a 100% Letter of Credit (LC) or a 30% transferrable LC. The strategy? They might not genuinely possess the funds but have a solid connection with the supplier, perhaps a Russian entity. With your domestic LC, they can cash it, secure 30% of the funds, and subsequently use this capital to issue a 100% international LC to the supplier. Only then might they release the POP and Q88, detailing the ship's status.

However, state-owned enterprises, and many private firms, are astute. They often employ a strategy of delayed action, creating a chicken-or-egg situation. They demand the POP and Q88 first, ensuring your ship's departure and full details, prior to issuing any performance bonds or domestic LCs. This approach stalls numerous trades. If a trading agency, owner, or trader lacks the capital for the initial deal, the entire transaction may collapse. No one wishes to be the first to shoulder the risk.

Whether trading in commodities like copper, sugar, or other goods, capital verification is often the primary request. Without showcasing funds, one won't see the seller's product details. If financial evidence isn't presented, shipment details remain confidential. The deadlock often hinges on intermediaries and their ability to foster trust. Common solutions include simultaneous transparency or both parties offering 50% performance guarantees, setting up mutual penalties in the event of a breach.

Commodity trading is intricate, with negotiations not merely revolving around prices or product legitimacy. It often concerns synchronizing processes and motivating a party to take the initial leap. Why the hesitation? Beyond simple trade lies politics, finance, and national regulations. With many items government-controlled, traders and financiers often play middleman roles. This field demands astuteness, especially from Chinese traders. Given the inconsistencies in trading links and the intricate environment, balance is crucial.

In my opinion, unless you're an authentic financier or directly connected to the product source, commodity trading should be a side endeavor. If you're merely an intermediary, it's precarious to rely solely on this trade. Emphasizing: if you're not directly involved at either end, treat commodity trading as a secondary business. Depending solely on it might result in years without a successful deal.