We have a number of clients seeking to finance scrap metal transactions. We hear from many experienced scrap brokers who are ready to become a principal in the transaction. Perhaps our client wants to send 4000 metric tons of HMS 1 and 2 from the United States to his Asian scrap buyers. We review all the deal details to make certain the deal will generate client profits after scrap metal finance charges. Then we help him arrange payment for scrap so that he can control the deal.
Typically our client will have an incoming LC issued by Asian customers in countries such as Bangladesh, India, Korea or Vietnam. Those customers will generally know that their LC's will need to be confirmed by a Western bank.
Our clients come to us seeking to pay the supplier, the scrap yard, with that payment secured by the incoming LC.
Scrap Metal Trades Often Have Special Requirements
The problem in scrap metal finance is that many of the smaller scrapyards have their own cashflow requirements, and they generally require a wire transfer when around the time the scrap is loaded. As a practical matter, it may be several weeks from the time the first truckload of scrap leaves the yard to when the shipment is completed and on its way, with ship bills of lading finally available.
For the funder, this means that the required finance structure is not a true back to back letter of credit, but rather, a wire transfer backed by an incoming letter of credit. We have the capability to arrange finance with this structure, and can assist in establishing a properly secured and financed scrap deal.