Banks freeze Radiant World funds as top miners cut ties

Radiant World, one of the world's largest iron ore traders with annual revenues of about $12 billion, is facing a rapidly escalating crisis after major banks froze its funds and the industry's biggest miners moved to sever ties with the Singapore-based trading house.

Banks Pull Back

Deutsche Bank ↗ 1.14% and KBC Group ↘ 0.45% have frozen some of Radiant World's Singapore bank accounts while carrying out compliance reviews, Bloomberg reported on Thursday. The moves came after Bloomberg reported last week that some of the largest commodity-trading firms had stopped dealing with Radiant World amid concerns it provided banks with falsified documents about iron ore trades.theedgemalaysia+1

Several other financiers have also retreated. Arab Bank Switzerland has stopped issuing new letters of credit for Radiant World's iron ore shipments, ICBC Standard Bank has suspended repo financing with the company, and Societe Generale Société Générale S.A. is reducing its exposure — a process it began months ago after becoming aware of fraud allegations in the market, according to Bloomberg. Reuters confirmed the report of the account freezes.globalbankingandfinance+1

Miners Sever Relationships

Rio Tinto ↗ 1.46% and Vale ↘ 0.07%, the world's two largest iron ore miners, have struck Radiant World off their lists of approved customers, according to people familiar with the matter. Rio Tinto still has some limited pre-existing contractual commitments to fulfill, one person familiar with the company's position said.theedgemalaysia+1

Glencore CEO Gary Nagle confirmed on Wednesday that his company had halted new business with Radiant World and was "checking how to exit" its outstanding exposures. Trafigura said it does not trade with Radiant World, while BHP ↗ 2.86% has not traded with the company for at least several months. Cargill stopped dealing with Radiant World several months ago, Bloomberg previously reported.theedgemalaysia

Market Impact and Company Response

The uncertainty surrounding Radiant World is already being felt in the iron ore market, where prices this week fell to their lowest in more than a year. The private company grew quickly in recent years to become one of the world's largest iron ore traders, relying on credit from a wide range of suppliers, customers, and financiers to handle vast quantities of goods.theedgemalaysia

A Radiant World spokesperson said the company "remains well-capitalised with healthy liquidity, supported by a consortium of long-standing banking partners," adding that it continues to meet its obligations and remains on track to deliver on fourth-quarter targets. The company has denied wrongdoing and said it "conducts its business to the highest commercial and legal standards."theedgemalaysia