Markets & pricing
Contango and backwardation (forward curve)
Terms describing futures prices relative to the spot price. In contango, deferred prices are above spot, usually reflecting ample supply and the cost of carry – storage, financing, insurance – which makes holding stock and selling forward attractive. In backwardation, spot is above futures, signalling a tight market where prompt material is scarce and pushing buyers to secure supply quickly. The shape of the curve is an important signal for raw material stock policy and contract timing.
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.
GAFTA and FOSFA standard contracts
London-based trade associations that provide standard contract forms, sampling and analysis rules and an arbitration system: GAFTA (Grain and Feed Trade Association) for grains, pulses, feed and spices, and FOSFA (Federation of Oils, Seeds and Fats Associations) for oilseeds, vegetable oils and animal fats. Much of the world’s grain and vegetable-oil trade is done by reference to forms such as GAFTA 100, GAFTA 64 or FOSFA 54. Because these forms settle quality determination, late shipment, default and arbitration in advance, they cut negotiation time and legal risk.
Hedging (price-risk management)
Offsetting the price risk of physical buying and selling by taking an opposite position in derivatives such as futures, forwards, options or swaps. A cable maker taking copper in three months can buy LME copper futures today to protect against a price rise, while a trader that has sold at a fixed price sells futures. Forward FX contracts manage currency risk in the same way. Hedging is not speculation: the aim is to protect the margin rather than to make a profit, though margin calls and basis risk must be managed.
Landed cost
The total cost of a raw material until it reaches the manufacturer’s warehouse: product price + freight + insurance + customs duty and additional taxes + port, terminal and demurrage charges + customs broker fees + inland haulage + financing (letter of credit, interest) + exchange-rate effects. Offers with different Incoterms, origins and payment terms can only be compared correctly once converted to a landed-cost basis. A distant supplier with a low FOB price may end up more expensive than a nearby one after freight and anti-dumping duty.
London Metal Exchange (LME) and commodity exchanges
The exchange that sets global reference prices for non-ferrous metals such as copper, aluminium, zinc, nickel, lead, tin and cobalt; its official prices and monthly averages are used as indices in physical contracts. A physical buyer pays the LME price plus a premium that depends on origin, brand and delivery location (e.g. the Rotterdam aluminium premium). Other key exchanges: CME/COMEX (copper, gold), ICE (Brent, cocoa, coffee, sugar, cotton), CBOT (soybeans, corn, wheat), SHFE (Shanghai metals), DCE and ZCE (Chinese plastics, iron ore and agricultural futures) and Bursa Malaysia (palm oil).
Minimum order quantity (MOQ)
The smallest order a supplier will accept. For raw materials the MOQ is usually defined by a container (e.g. 20–25 t of resin, one 40’HC), a production batch or a truckload; for bulk cargo it may be a ship parcel such as 5,000 t. Requests below the MOQ are served at a higher unit price, from stock or via distributors. On the platform, large transactions go to the deal room, while small quantities are routed to direct contact with the supplier.
Offer validity and price revision
The period during which an offer can be accepted unchanged – kept short for volatile raw materials, from a few hours to a few days. Contracts with long lead times or periodic deliveries use price-revision (escalation) clauses: if a raw-material index, energy cost, freight or exchange rate moves beyond a set threshold, the price is updated by formula. Such clauses stop fixed-price contracts from collapsing into cancellation or default when markets move sharply.
Price reporting agencies (Platts, Argus, ICIS, Fastmarkets) PRA
Independent organisations that collect deals, bids, offers and market talk for commodities not traded on exchanges – or whose physical markets differ from exchange prices – and publish daily or weekly assessed prices. S&P Global Platts and Argus are benchmarks for oil, LNG, fertilisers and coal; ICIS and ChemOrbis for petrochemicals and plastics; Fastmarkets (Metal Bulletin) for metals, ores and paper; CRU for steel and aluminium. Their prices serve as indices in formula-priced contracts and are audited against IOSCO principles.
Request for quotation (RFQ)
A document in which a buyer asks suppliers for prices, stating the material, specification, quantity, delivery place, Incoterm, payment terms and required delivery date. A good RFQ also sets the acceptable quality range, required documents (COA, TDS, certificates), packaging and how long offers must remain valid, so that offers can be compared like for like. On the marketplace, published buying requests are sent to verified suppliers in the relevant category.