A Practical Guide to Industrial Commodity Trading and Sourcing

Specification before price

Almost every commodity dispute traces back to an underspecified enquiry. A purchase described as "HCl acid, 1000 MT" invites offers on different concentrations, inhibitor packages and packing, none of which are comparable. The enquiry has to fix grade, concentration, impurity limits, test method, packing, origin and inspection regime before a price means anything.

Browse per-commodity price pages on Tradloc when purchasing an unfamiliar material — each covers typical specification, packing and the drivers that move the price, which is enough to write a defensible enquiry.

Establishing a defensible price reference

Buyers without a market reference negotiate against the supplier's anchor. Check indicative chemical prices with the Tradloc Chemical Price Estimator, or estimate steel, aluminium and copper prices with Tradloc where the purchase is fabrication-related, and record the band and date. Where the contract runs over months, track petrochemical price levels on Tradloc so the feedstock line behind a polymer or solvent price can be reviewed at each renewal.

A reference band does two things: it identifies an outlier offer immediately, and it gives the internal approver a basis for signing off on a price that is not the lowest received.

Comparing offers on a delivered basis

Ex-works and FOB offers from different origins are not comparable. Convert every offer to landed cost: estimate ocean freight with the Tradloc Shipping Cost Calculator, then calculate import duty and total landed cost on Tradloc. Rankings reverse regularly at this step, particularly when a nominally cheaper Far East offer carries longer transit, higher freight and a duty rate the buyer had not checked.

• —Fix the Incoterm before comparing — EXW, FOB, CFR and DDP are different products
• —Include inspection, demurrage risk and payment terms cost in the comparison
• —Confirm the HS code and duty rate rather than assuming last shipment's classification
• —Price the transit-time difference where it affects operational schedule

Contracting so a quality dispute is resolvable

The clause that decides a quality dispute is the inspection clause: who inspects, where, against which test method, and whose certificate is final. Set distribution and supply terms using DocMak agreement makers to put specification, Incoterms, inspection, title transfer and remedies for non-conforming cargo into the contract, and create a mutual or one-way NDA with DocMak before exchanging pricing or formulation detail with a new counterparty.

For oilfield chemical buyers, tie the specification back to the treatment design. A corrosion inhibitor that meets a generic assay but fails the intended temperature and brine conditions is a specification failure, not a supply failure — which is why the KEMISIM fluid design and scale management workflows should set the specification the enquiry is written from.