In times of turbulence, the world needs physical commodity traders

Published Thu, May 21, 2020 · 09:50 PM

TURBULENT markets, such as those triggered by the Covid-19 crisis, inevitably raise worries about risks to the financial and trading system. Given the scale of recent price movements, particularly the oil price, attention has naturally turned to the commodities trade. This attention was further sharpened by the difficulties experienced in April by some smaller trading firms in Singapore. Some are asking whether such difficulties could balloon into a systemic problem in the market, a threat to financial stability, or even a danger to the continued supply of necessary commodities.

These questions, which have been raised before and are often accompanied by calls for tighter regulation of commodities trading firms, are understandable given the long shadow cast by the global financial crisis of 2008-2009 and the cracks in the banking …