Why Physical Commodity Supply Chains Leave No Room for “Risk-Free” Brokers
Grain in a silo, copper in a warehouse, crude in a pipeline—every tonne or barrel is financed, hedged, and already spoken for. Spreads between source and destination are razor thin because each step carries storage, freight, quality loss, and credit exposure. A commission-only broker with zero capital and zero risk cannot wedge fat margins into a chain governed by futures curves and bank covenants.
Typical Supply-Chain Path
1. Producer
— sells forward under offtake or spot tender.
2. First Handler / Aggregator
— pools volume, arranges warehouse or tank receipts.
3. Trade House / Merchant
— hedges exposure, books freight, draws on borrowing-base lines.
4. Importer / Refinery / Mill
— lifts cargo, finances through inventory or receivables credit.
5. End User
— pays under sales contract, often within 30-45 days of discharge.
Everything Is Pre-Financed
- Pre-export finance:
Banks advance capital against crop or mineral in the ground.
- Borrowing-base facilities:
Merchants pledge inventory to draw working capital at Libor/SOFR plus a small margin.
- Receivables discounting:
Importers fund cargo the moment it clears customs, repaying when downstream buyers settle.
- Futures hedging:
Long product is offset with short paper, locking in basis and reducing price risk to cents per unit.
Indicative Gross Trading Spreads
| Commodity |
Route (FOB → CIF) |
Typical Spread |
Main Cost Drivers |
| Crude Oil |
West Africa → Rotterdam |
USD 0.20–0.40/bbl |
Freight, letter-of-credit fees, demurrage |
| Copper Cathode |
Chile → Shanghai (container) |
USD 35–55/MT |
Ocean freight, handling, interest carry |
| Feed Wheat |
Ukraine → MED (handysize) |
USD 4–7/MT |
Black Sea freight, fobbing cost, quality risk |
Those spreads pay for logistics, finance, insurance, and hedging. What’s left is trading profit—often single digits per tonne. A chain of five brokers claiming USD 10/MT each would vaporise the economics.
Why Commission-Hungry Chains Fail
- No capital at risk:
Banks fund producers and merchants, not PDF pushers.
- No logistical control:
Vessel slots, railcars, and warehouse queues are booked months ahead; a broker can’t insert extra cargo.
- No credit capacity:
Counterparties want an LC, SBLC, or corporate guarantee—not a promises-only IOU.
- Compliance hurdles:
KYC teams blacklist deals with unclear beneficial ownership or unexplained fee waterfalls.
Fast Checks to Shut Down Time-Wasters
- Request title documents or warehouse receipts traceable to a recognized storage facility.
- Ask for the borrowing-base bank’s contact; brokers without financing vanish.
- Verify that offered volumes align with port throughput data—phantom cargoes exceed physical capacity every time.
- Demand a firm price tied to a screen reference (ICE, LME, CBOT) plus differential; vague “huge discount” claims collapse under scrutiny.
Financely supports producers, merchants, and end users who control stock or credit. If your proposal relies on multi-layer commission chains with zero funding, we decline. Bring real cargo, real risk, and a clear financing gap—we’ll structure the capital.
Present a Real Transaction
Margin ranges are illustrative, based on recent spot fixtures, hedging costs, and public freight assessments. Financely structures trade finance only for transactions backed by verifiable product and counterparty credit.