Rising Rates Are Reshaping Once-Lucrative Commodity Trades

By Archie Hunter (Bloomberg) —

Higher interest rates are forcing commodity traders to rethink some deals and push up prices, in the latest example of how a period of rapid central-bank hiking is reshaping global business.

The companies that buy, sell and transport the world’s natural resources are particularly vulnerable to rising rates, because they rely on banking lines to finance their trades – from shipping a cargo of wheat or oil to holding inventories of aluminum.

As rates rise, the additional costs of a weeks-long journey or extended storage in a warehouse or tanker are making certain trades far less attractive. The financing cost can dictate whether deals are made or not, and some companies are seeking to pass on the expense to their customers, or getting out of some trades completely.

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