[www.ferro-alloys.com] Hill Summer, who is the managing director of Million Link (China) Investment Company, gave a great speech in February Vietnamese meeting about international ferroalloys and steel market. The next is the main points of his speech:

Finance is part of any trade, if it is not delivery and payment at same moment. If it is not supplier finances the buyer, it is buyer finance the supplier. The point is the time of cargo delivery and payment.

Due to difference of both parties’ negotiation power, such as cash flow, credit degree, negotiation team, it may be hard to enter into contract because the payment term can not be finalized. Third party is used by both parties. First choice, of course, bank.

Applicants: Buyer, supplier, trader, agent

Purposes: Pre-shipment finance, transit finance, warehouse finance, open account.

Cargoes: Raw materials finance, Equipment finance

Timing: 3 months short term finance, long term finance

Open account finances: factoring, forfaiting

Guarantees: documents finance, warehouse finance, open account

Trade finance is different to bank loan which relies on credit limit or draft. Trade finance is that the financer enters into a supply chain as a trader in order to gain fixed return of investment.

If a trader is invited to be a financer, the inviter’s purpose is mainly to ease his cash flow stress or cash safety worries.

Traditional trade is missing, trade finance spread.

Higher transparency reduces commercial value of information which is the main value of international trade 30 years ago.

Instead, at transparent business model, trade finance develops faster.

• [Editor:Chen Zhen Seng]