Traceability and Kobe Steel

I just posted a Reuters story regarding Kobe Steel. At first sight, this is a story of mismanagement, lack of corporate discipline and profits at any cost – in a way similar to the VW scandal regarding CO2 emissions reporting. The impact is obvious – Kobe Steel stock is in free fall and its brand equity damaged to a serious degree. However, for commodities traders there is a deeper meaning to the developing scandal around traceability and trust. Trust is a key component in commodity markets. Banks lend money, buyers buy and so on based on trust that tests and standards are met and that the data is accurate. When trust is broken or corrupted, serious issues emerge for everyone in the industry. Verification requires traceability. Not just the ability to trace something back through the supply chain but to identify the checks and balances along the supply chain. Recent scandals involving warehoused metals and duplicated warehouse certificates to pledge metal as collateral for multiple bank loans, hitting companies ranging from Citic to Standard Chartered, are still fresh in the memory too. It is difficult to stop deliberate fraud but a proper and verifiable approach to traceability and methods to Continue reading Traceability and Kobe Steel. This article appeared first on CTRM Center.