How Commodity Brokers Get Paid: Seller-Paid Commission, IMFPA, and Why LME-Linked Deals Get Tricky

Who actually pays the broker

The seller does, almost always, and not out of generosity. The seller owns the margin in the deal, the seller controls the proceeds, and the seller is the party the intermediary brought a buyer to. The fee is deducted from the seller's receipt, not added to the buyer's invoice — which is why a buyer asking "what is your commission?" is usually asking the wrong party.

There are two real exceptions. A buying agent mandated by an end user is paid by that end user, and is a different animal with different duties — they owe loyalty to the buyer and their fee belongs in the buyer's cost base. And in a back-to-back structure nobody pays a commission at all, because the intermediary buys and resells as principal and earns a spread. That distinction matters more than it sounds: a spread is trading income with trading risk, title and liability attached; a commission is a fee for introduction and facilitation. Confusing the two is how intermediaries end up carrying performance risk they never priced.

The paperwork, and what it is actually worth

Two documents carry the arrangement. The NCNDA (non-circumvention, non-disclosure agreement) protects the introduction. The IMFPA (irrevocable master fee protection agreement) is the payment instrument: the seller instructs their bank to pay a named intermediary a stated amount per tonne or percentage, on receipt of the buyer's funds, for the life of the contract and its renewals.

Worth being blunt about this: an IMFPA that the seller's bank has never seen is a promise between two parties, not a banking instrument. It is only as good as the seller's willingness to honour it. The versions that work are annexed to the sale contract itself, referenced in the payment clause, and acknowledged by the paying bank. Our commodity trading glossary covers the surrounding documents — LOI, ICPO, FCO, NCNDA, SPA and the payment terms they reference.

Three ways the fee is structured

Why a floating price makes it tricky

Under a fixed price, the fee is knowable at signature. Under a formula — LME + premium ± differential, explained in our guide to how to calculate a commodity price — five separate things come loose.

1. The base moves after you have agreed the fee

Take 500 t of P1020A aluminium. LME cash at $3,274/t on 11 September 2026, QMJP Q3 2026 premium at $395/t.

Read the last row carefully. The US Midwest premium is largely Section 232 tariff passing through to the buyer. A percentage fee charges the seller a commission on a customs duty — $27,495 against $18,345 for the identical cargo and identical work. No seller who understands that will agree to it twice.

2. Nobody said which value the percentage applies to

"1% of the value" is not a term. Of the FOB value, or the CIF value including freight and insurance? On a CIF cargo, a percentage of the gross invoice pays the intermediary a slice of the shipowner's revenue. Of the metal value only, or including the regional premium? On US business that single word is worth 40% of the fee. Write the base as a clause, not an adjective: "the FOB value of the goods, excluding freight, insurance, duties and taxes".

3. There are two invoices, and the fee has to name one

Formula-priced cargoes usually invoice twice: a provisional invoice at shipment, typically 90% against a provisional price, and a final invoice once the quotational period settles and weights and assays are agreed. On concentrates that can be M+3 or later. If the IMFPA says the fee is payable on "receipt of payment", which payment is it? The workable answer is both: the fee on the provisional at the provisional price, the balance on final settlement.

4. Deductions shrink the base after the deal is done

Weight franchise, moisture, assay adjustments, quality penalties, demurrage, insurance claims — every one of them reduces the final invoice. A fee defined as a percentage of the final invoice quietly absorbs a share of problems the intermediary did not cause and cannot control. Demurrage in particular is a dispute between the seller and the shipowner; it has no business reducing an introduction fee. Say so in the clause.

5. The differential is where the margin actually lives

In a formula written LME + QMJP ± $10, that last ten dollars is the negotiated part. It is also, on many deals, the entire intermediary margin. Premiums move: the Rotterdam duty-paid premium fell roughly 18% between May and August 2026, from about $600/t to around $490/t. A $10/t margin agreed against a premium that then moves $30 is not a thin margin, it is a negative one. Fee agreements written against the differential, rather than against the tonnage, are the ones that fail quietly.

Clauses that keep a fee payable

• Amount — stated per metric tonne. If a percentage is unavoidable, define the base in the same sentence.
• Trigger — payable within a stated number of banking days of the seller's receipt of cleared funds, per shipment.
• Provisional and final — fee on the provisional invoice at the provisional price, balance within days of final settlement.
• Deductions — name which adjustments touch the base and which do not. Demurrage, detention and insurance claims should not.
• Partial shipments — pro rata on each shipment, never on completion of the whole contract.
• Floor — a minimum per shipment, so a small trial cargo still pays for the work.
• Term and tail — the fee survives into renewals, extensions and repeat business for a stated period, typically two to five years.
• Co-broker split — stated in the IMFPA, with each intermediary paid directly by the seller's bank rather than down a chain.
• Bank charges and currency — who bears the wire costs, and in which currency the fee is denominated.
• Governing law and forum — a fee agreement with no enforceable venue is a letter of intent with better formatting.

Red flags worth naming

The intermediary market carries a long tail of deals that never close, and the pattern is recognisable. Commission stacked five and six parties deep, where the total fee exceeds any margin the cargo could carry. Fee agreements signed before there is a contract, a seller with title, or a buyer with funds. Percentages quoted without a base. "Soft offers" that cannot be verified against a producer, a warehouse receipt or a proof of product. And the IMFPA circulated for signature by someone who is not the seller and cannot instruct the seller's bank.

The test that filters most of it: can you name the seller's bank, the paying clause in the contract, and the person who signs the payment instruction? If not, there is no fee protection, whatever the document is called.

Sources and notes

Price levels used in the worked examples: LME aluminium cash settlement of $3,274/t for 11 September 2026; QMJP Q3 2026 premium of $395/t; Rotterdam P1020A in-warehouse duty-paid assessment of $490–520/t on 8 September 2026 and its decline from about $600/t in May 2026; US Midwest premium of $1.0095/lb ($2,225/t) as assessed on 23 January 2026, under Section 232 tariffs at 50% since June 2025. Fee structures and documentation practice reflect physical trade custom in metals, bulks and fertilizers.

This is how the market works in practice, not legal advice. An IMFPA is a contract — have yours reviewed against the sale contract it depends on, in the jurisdiction that will hear the dispute.