F · 2
Firm offer vs. indicative price
An indicative price signals the market level and does not bind the seller; price ranges in listings are usually of this kind. A firm offer is a binding offer for a defined quantity, quality, delivery and payment terms, valid for a stated period (e.g. “valid 24 hours”, without “subject to prior sale”), which forms a contract as soon as the buyer accepts it. Because raw material markets move quickly, firm offers are usually short-lived, and reservations such as “subject to availability” should be watched for.
Formula pricing (index-linked pricing)
A method in which the price is tied to a market index instead of a fixed figure – for example “LME copper average of the shipment month + USD 85/t premium”, “Platts Dated Brent + USD 2.50/bbl” or “ICIS PP homopolymer CFR Türkiye monthly average minus 1 %”. The pricing period (B/L month, arrival month or quotational period, QP), the index source and the exchange rate used for payment must be stated clearly in the contract. In term contracts it protects both parties fairly against price swings.