Commodity traders face rising finance costs as big banks pull out

* Sector rocked by ABN Amro withdrawal from trade finance

* Banks spooked by commodity trader defaults and frauds

* Costs will rise as funds, bonds will not fill void

By Julia Payne

LONDON, Aug 14 (Reuters) – Commodity trade financing by the world’s banks is drying up at a rate not seen in more than 20 years, leaving small and medium sized firms most exposed, banking and trading sources said.

Banks are retrenching after the coronavirus crisis led to defaults by some trading houses, intermediaries in the global movement of oil, metals and agricultural goods which link producers and end-users, and also exposed a series of frauds.

This week Dutch bank ABN Amro, one of the biggest commodity trade financiers, quit the business after it was among the banks worst hit by the $3.8 billion default of Hin Leong, one of Asia’s biggest oil traders.

“These things are cyclical,

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