CIC aims to revolutionise commodities trading

Singapore

IN the world of commodities trading, Commodities Intelligence Centre (CIC) is a relative minnow. Nevertheless, it hopes to "revolutionise" commodities trading by facilitating online business-to-business (B2B) trades, promising to reduce transaction costs for buyers and sellers of a wide variety of commodities.

Commodity producers are "regularly exploited" in a system that involves many middlemen facilitating trades between producer and end-user, said CIC's chief executive Peter Yu.

They accept lower prices because they lack access to market information and have little bargaining power. CIC aims to change this by introducing a greater degree of transparency in trades.

Launched in October 2018, CIC is a joint venture between ZALL Smart Commerce Group, trade platform Global eTrade Services (GeTS) and the Singapore Exchange (SGX).

Its platform today has over 5,200 registered users across 64 countries including Singapore, Malaysia, India and China.

Commodities available on the platform range from aluminium rods to zinc ingots, and include chemicals, metals, coal and cotton.

"Commodity buyers and sellers around the world can meet and directly transact with one another with greater price transparency; and this allows them to bypass the middleman, as well as transcend geographic barriers, time zones and language," said Mr Yu.

Catalist-listed coal miner BlackGold Natural Resources is among the companies that appears to be sold on the benefits of moving online.

The company said that while it has not yet made the shift, it intends to do so in the future.

A spokesperson said an online platform would increase the efficiency of trading in terms of payments to vendors, insurance, logistics and moving supplies to ports.

But while the benefits of direct trading online are clear, there are other factors to consider.

Coal producer Geo Energy Resources estimates that a shift to online trading would generate substantial cost savings, yet it is not willing to do so yet.

Its CEO Tung Kum Hon said the company currently spends about 2-3 per cent of its annual revenue on "marketing fees" to two coal offtakers: Macquarie Bank and Trafigura.

Assuming annual sales of 10 million tonnes of coal at US$30 per tonne, the company would be paying fees of US$6 million each year.

If, however, Geo Energy sold its coal directly to end customers, Mr Tung expected the company's costs might be limited to the salaries of a few trading executives. But he noted that a key concern is access to the credit profiles of end consumers.

"Currently, we are not worried about non-payments (from Macquarie and Trafigura)," he said. "Online trading is a very good way forward, if we can have direct access to the credit profile of end buyers."

CIC believes its blockchain solution platform Trade Pro can adequately meet the needs of both buyers and sellers.

Trade Pro claims to offer transparency, traceability and data security as it uses blockchain technology to record and store transaction data between parties, which allows for easy verification and prevents tampering.

According to CIC's Mr Yu, the pandemic has served as a "wake-up call for companies" to rethink their business and operating models amid the disruption and changes of global supply chains.

B2B platforms such as CIC have been able to provide buyers and sellers with alternatives during this period.

"Digital adoption and transformation have become more pressing and important than ever. It has become a top priority for companies, regardless of their size," he said.

He added that companies are now using CIC's services to diversify their revenue sources and extend the global reach of their supply chains, in a bid to capture cross-border growth opportunities in Asia and build business resilience.