Commodity trading glossary

CTRM (Commodity Trading & Risk Management) is the software category for running the full life of a physical commodity deal: pricing, contracts, logistics, multi-currency P&L, cashflow and document compliance.

ETRM (Energy Trading & Risk Management) is the CTRM variant built for energy markets: power, gas, oil and their derivatives.

P&L (Profit & Loss) is the net result of a deal or a period: revenue minus costs. In commodity trading it is usually calculated deal by deal and then aggregated per period.

A deal’s GP (Gross Profit or gross margin) is what is left of revenue after paying the purchase and the trade’s direct costs: freight, commissions, charges and insurance. Some desks call the plain difference between sale and purchase price “GP”.

EBIT (Earnings Before Interest and Taxes) is operating profit, before interest and tax. For a single deal it is GP minus the overhead (office, team, software) allocated to it, usually per tonne.

Incoterms (International Commercial Terms) are the standard rules published by the International Chamber of Commerce that set out who bears each cost and risk in a cross-border sale: transport, insurance, customs and delivery.

FOB (Free On Board) is the Incoterm where the seller delivers the goods on board the vessel at the agreed port of loading. From that moment the buyer carries the cost and the risk of the sea leg.

CIF (Cost, Insurance and Freight) is the Incoterm where the seller pays for the goods, the insurance and the freight to the destination port — even though risk passes to the buyer once the goods are loaded.

The Bill of Lading, or B/L, is the document issued by the ocean carrier acknowledging receipt of the cargo and acting as title to the goods. It is the most critical piece of paper in a seaborne commodity deal.

A freight forwarder is the company that organises the international movement of the cargo: books vessel space, handles documents, coordinates with the port and, in many cases, takes care of customs.

POL (Port of Loading) is where the cargo goes on board; POD (Port of Discharge) is where it comes off. Together they define the sea route of the deal.

Demurrage is the penalty a carrier or terminal charges when a container or vessel stays in port longer than the agreed free time. It is one of the least predictable cost lines in a deal.

FX (Foreign Exchange) is the rate between two currencies. In commodity trading, exposure appears whenever you buy and sell in different currencies, and it can move the margin as much as the price of the goods.

Hedging is taking an opposite position, usually with a financial instrument, to offset the price or currency risk of a physical position.

Cashflow is the real movement of money in and out over a period. In commodity trading, forecasting it 30/60/90 days out is critical: payment terms are long and costs usually fall due before the money comes in.