The transaction involved Rio Tinto selling a bulk shipment of iron ore originating in Australia to a Cargill customer in China last month.
The trade was completed using contract automation systems provider Chinsay’s integrated Intelligent Contract Platform (ICP) and technology firm essDOCS’ Document Exchange (DocEx) platform, which were integrated into Voltron, an open-source industry platform that facilitates the creation, exchange, approval, and issuance of letters of credit on the Corda enterprise blockchain platform developed by software company R3.
The ICP standardizes the process of creating, validating, archiving and sharing of commodity and freight contracts, while DocEx, developed by essDOCS - a provider of financial and supply-chain technologies - enables the electronic signing, exchange and legal transfer of title documents.
“In using ICP, Rio Tinto and Cargill collaborated on a single platform to dramatically reduce the time it takes to create, issue, approve and digitally sign commodity contracts from several days to under two hours,” Cargill told Fastmarkets.
“[…] all relevant trade participants - namely Rio Tinto, Cargill, the shipping agent, the ship owner, HSBC Singapore and BNP Paribas - collaborated on a single web-based platform to draft, approve, sign, issue, transfer and electronically present the [electronic bill of lading - eB/L], as well as upload relevant supporting documents, slashing trade document turnaround to hours as opposed to days/weeks,” it added.
“The integration of these technologies into Voltron has, for the first time, allowed for a complete, uninterrupted transaction flow that connects data from Chinsay’s ICP and essDOCS’ DocEx platforms to Voltron’s trade finance blockchain,” Cargill said.
Aside from speed, Cargill noted several other benefits of using the technology to complete the trade, including increased flexibility and accuracy that it brought to the process.
Last year, BNP Paribas and HSBC Singapore completed Singapore’s first fully digitized end-to-end letter of credit transaction that also involved Rio Tinto selling a bulk shipment of iron ore from Australia to Cargill.
In that transaction, BNP Paribas had issued a letter of credit over the blockchain on behalf of Cargill to HSBC Singapore, which acted on behalf of Rio Tinto.
In the most recent trade between Rio Tinto and Cargill, the creation and signing of the contract as well as the application of the letter of credit and bill of lading were all done electronically.
The contract data set created during the process was also used to make the post-trade operations quicker, more efficient and transparent, according to Cargill.
Trading involving iron ore has seen the incorporation of several efficiencies over the years, such as the emergence of online trading platforms such as Global Ore and the Beijing Iron Ore Trading Centre (Corex).
These platforms essentially work as a marketplace for members to offer and bid for cargoes, and allow participants to choose from a wide range of pricing options and counterparties. They also create a transparent pricing platform.
Trades done on such platforms, which are visible to a wide segment of the market, are used by price reporting agencies such as Fastmarkets as data points for the calculation of their daily indices.