Structured solutions for Asian project finance

With Basel III threatening to choke supply of traditional trade and project finance, the Asia commodities industry is increasingly turning to collateralised financing for growth – with improving liquidity in derivatives markets giving lenders and borrowers greater flexibility to manage their risks

According to international dealers active in Asia commodity finance, regulatory and market-related factors are driving increased volumes of lending products that employ both physical and financial underlyings to manage counterparty and price risks. By Deutsche Bank’s estimation, 30%–40% of base metals trade flow in Asia is funded on a collateralised basis, a level that could double over the next few years if prices continue to increase at current rates.

On the one hand, the increased capital