Blockchain benefits still murky for most commodities trading

Major companies and banks have tested blockchain across commodities such as in power, diamonds, food and oil. (AFP)
Updated 16 August 2018
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Blockchain benefits still murky for most commodities trading

  • Blockchain, originally the platform behind cryptocurrency Bitcoin, is viewed by some as a solution to inefficiencies
  • Among the obstacles to scaling up the technology include reconciling terminologies and whether the switch to a blockchain platform is even financially justifiable

LONDON: Commodity firms and banks have been diving into blockchain pilot schemes over the last two years but the new technology’s application for most trading has likely been over-hyped, a report by Boston Consulting Group (BCG) said.
Blockchain, originally the platform behind cryptocurrency Bitcoin, is viewed by some as a solution to inefficiencies, improving transparency and reducing to the risk of fraud. But BCG believes its potential has been exaggerated.
A high-tech ledger, blockchain uses a shared database that updates in real-time and can process and settle transactions in minutes without the need for third-party verification.
The volume of trades through various schemes has been negligible so far and it is too early to tell how soon it might reach a critical mass.
“There are so many pilot schemes but none have become real production scale systems yet. One of the problems is that it’s not designed for physical trades. The fundamental issue: how do you track a physical entity in a virtual world? It’s two worlds colliding,” Antti Belt, co-author of the BCG report, said.
Among the obstacles to scaling up the technology include reconciling terminologies and whether the switch to a blockchain platform is even financially justifiable.
“The industry is very old and everyone uses a different language. How do you define quality, shipment schedules ... a lot of reconciliation is currently needed for both sides,” Belt said.
“People have spent millions, sometimes over $100 million, on IT system, do they want to do it again?”
Furthermore, it is uncertain to what degree traders will want to adopt a technology that will erode already razor-thin profit margins.
BCG said that as the platforms take shape, it would be “bad news” for merchant traders as the price inefficiencies and unequal dissemination of information that they rely on to make profits would disappear.
“The use of blockchain solutions would significantly improve transparency ... It would also create a more efficient and liquid market, moving commodity trading away from bilateral deals struck directly between two parties to transactions based on electronic platforms to match buyers and sellers,” the report said.
Co-author Steven Kok said interest in the wider adoption of blockchain technology would start where the primary driver is certifying the source of the asset, as with diamonds, rather than efficiency.
Anglo American’s De Beers said in May it had tracked 100 high-value diamonds from miner to retailer using blockchain, in the first effort of its kind to clear the supply chain of impostors and exploitation.
Nevertheless, major companies and banks have tested blockchain across commodities such as in power, diamonds, food and oil. Last year, a consortium including major banks, trading firms and producers BP, Equinor and Royal Dutch Shell announced that they would develop a blockchain-based platform ready to go by the end of 2018.
Separately, commodities trader Trafigura set up another platform with IBM and Natixis for the US crude oil market last year. Major agriculture traders have also tried blockchain such as Louis Dreyfus Co. with a cargo of soybeans.
“Simply put, blockchain may not be the right answer for all players,” the report concluded.


Porsche first German carmaker to abandon diesel engines

Updated 23 September 2018
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Porsche first German carmaker to abandon diesel engines

  • The company would concentrate on its core strength, ‘powerful petrol, hybrid and, from 2019, purely electric vehicles’
  • But Porsche promised it would keep servicing diesel models on the road now

BERLIN: Sports car maker Porsche said Sunday it would become the first German auto giant to abandon the diesel engine, reacting to parent company Volkswagen’s emissions cheating scandal and resulting urban driving bans.
“There won’t be any Porsche diesels in the future,” CEO Oliver Blume told the newspaper Bild am Sonntag.
Instead, the company would concentrate on what he called its core strength, “powerful petrol, hybrid and, from 2019, purely electric vehicles.”
The Porsche chief conceded the step was a result of the three-year-old “dieselgate” scandal at auto giant Volkswagen, the group to which the luxury sports car brand belongs.
VW in 2015 admitted to US regulators to having installed so-called “defeat devices” in 11 million cars worldwide to dupe emissions tests.
It has so far paid out more than €27 billion in fines, vehicle buybacks, recalls and legal costs and remains mired in legal woes at home and abroad.
Diesel car sales have dropped sharply as several German cities have banned them to bring down air pollution — a trend that Chancellor Angela Merkel was due to discuss with car company chiefs in Berlin later Sunday.
Stuttgart-based Porsche in February stopped taking orders for diesel models, which it had sold for nearly a decade.
Blume said Porsche had “never developed and produced diesel engines,” having used Audi motors, yet the image of the brand had suffered.
“The diesel crisis has caused us a lot of trouble,” he said, months after Germany’s Federal Transport Authority ordered the recall of nearly 60,000 Porsche SUVs in Europe.
Blume promised that the company would keep servicing diesel models on the road now.
According to the paper, Porsche also faces claims of having manipulated engines to produce a more powerful sound with a technique that was deactivated during testing.
Blume acknowledged that German regulators had found irregularities in the 8-cylinder Cayenne EU5, affecting some 13,500 units.
Merkel, Transport Minister Andreas Scheuer and heads of German auto companies were due to meet in Berlin later Sunday to discuss steps to avoid more city driving bans.
The German government hopes to see one million fully electric and hybrid vehicles on the road by 2022, up from fewer than 100,000 at the start of this year.