News: General News

Trade-Credit Insurance Freeze Disrupts Supply Chains

Wednesday, September 23, 2020  
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A significant reduction in trade-credit insurance is contributing to recent supply chain slowdowns, according to a Sept. 22, 2020, Wall Street Journal article. Fueled by reduced sales in the aviation and automotive industries, insurers have grown increasingly unwilling to issue trade-credit policies for metals, including aluminum and nickel, the report said.

“The insurers’ retreat has added to the stress on commodity suppliers and traders, which are also finding it increasingly difficult to get funding from banks,” the Journal article said. “Higher insurance premiums squeeze profits in an industry that runs on slim margins.”

U.S. insurers and trade associations have reportedly encouraged the U.S. Treasury Department to support the market similar to European countries, which provide reinsurance protections. However, these talks have not resulted in assistance from the government yet.

One metal producer called the lack of trade-credit insurance availability, “a very major concern, if not our biggest.”

See the WSJ article (subscription required).