Hammad Steel’s specialist trade and project finance team works with our bankers to offer customised finance packages to the steel industry.
Our structured trade finance agreements fund working capital requirements, including pre-production finance. Hammad Steel also facilitates the satisfaction of offset and countertrade commitments which arise when, upon winning a contract from an overseas country, the contractor pledges to counterbalance it with reciprocal trade or investment.
Hammad Steel’s special projects team draws upon the Group’s wide spectrum of services to develop investment proposals and joint venture partnerships. Our project finance agreements fund expenditure on capital assets. Our consultancy services include market analysis and research, business planning, project feasibility assessments and due diligence.
Hammad Steel’s specialist price risk management team employs a range of derivative tools to manage the Group’s exposure to physical market price fluctuations. It also offers a hedging service to external parties, through a joint venture with several banks in UAE.
The management of financial risk is fundamental to our success. We have a dedicated team whose responsibility is to implement, manage and assess these risks. This includes implementation of the decisions of our internal credit committee, the management of payments to and from banks and the overall relationship with those banks. The team's specialist knowledge allows us to approach suitable banks for specialist service and proactively manage the financial risks of transactions.
Hammad Steel has a solid reputation with over 25 of the world’s leading banks, many of which are dominant lenders in international trade and commodities. We have a capital structure with a mix of committed short term and medium term facilities as well as substantial uncommitted transactional financing facilities. We use our own equity and bank borrowings to finance trade, which we sell to customers against letters of credit, on cash against documents terms or on open terms credit (predominantly with insurance cover).
Our rigorous risk management procedures and internal controls ensure that we have at all times an appropriate level of equity capital to absorb the risks we run in the course of our business. Our banking services and risk management activities are not only essential for the internal workings and efficient management of the Hammad Steel's activities; they also give our bankers and customers confidence in the manner in which we manage our business and commitments.
Structured Trade Finance
Hammad Steel's experienced trade finance team works with our bankers to offer customised finance packages to the steel industry. These are used to fund working capital requirements, including pre-production finance, mining finance and structured export receivable finance.
In most cases, the transactions involve an advance of funds made against the delivery of steel by a given date. The quantity, specification and price of the steel are agreed in the contract. Where there are frequent and ongoing steel deliveries, advances can be made on a revolving basis.
If the steel supplier has other requirements, Hammad Steel is frequently able to identify a customised solution by taking advantage of our extensive contacts in the financial and insurance markets, and by utilizing the latest risk-hedging techniques.
There may be circumstances where Hammad Steel advances funds to allow the steel producer to purchase raw material for steel production directly from Hammad Steel. This type of contract resembles a barter trade involving the supply of raw materials by Hammad Steel in exchange for the delivery of finished steel by the steel producer.
Steel mills often need to upgrade their capital equipment in order to remain competitive. This generally requires large scale financing over a medium term (2-5 years). Greenfield projects require financing over even longer time periods. The issue for both steel producer and capital equipment supplier is how to identify suitable sources of finance. The position is even more critical in emerging markets.
Where international banks remain willing to make loans to borrowers in emerging markets, increasingly they may try to mitigate the risk of default by obligating the borrowers to link their future sales revenues directly to the repayment of the loans.
Hammad Steel’s project finance agreements fund steel producers’ expenditure on capital assets. We are in a strong position to act as a go-between between the banks and borrowers. The steel producer normally enters into a long term agreement with Hammad Steel, whereby steel products of sufficient value to meet the loan repayments (and interest) are delivered to Hammad Steel. Hammad Steel pays for the steel by transferring funds into a specific project account to pay back the bank loan. In effect, Hammad Steel acts as a risk mitigant by reducing the default risk.
Price Risk Management
Steel prices are inherently volatile, making business planning a complicated and risky exercise. The introduction of steel futures provides a neutral tool that puts the steel industry back in control of price.
Hammad Steel’s specialist price risk management team employs a range of derivative tools that can help to manage exposure to physical market price fluctuations and they would be pleased to hear from you.
Most of the Price Risk Management is hedge by utilizing various hedging tools offered by LME (London Metal Exchange) to avoid any defualts or mishaps during the entire transaction till it comes to an end.