Reference

Commodity trading glossary.

The vocabulary that appears on contracts, inspection certificates and term sheets in physical commodity trade — 36 terms defined plainly, with the practical consequence rather than just the expansion of the acronym.

Incoterms and delivery Quality, inspection and reporting Specifications you will see on contracts Pricing, payment and structure Mining and project terms

Incoterms and delivery

The delivery basis decides who pays for freight and insurance and where risk transfers. Comparing an FOB price with a CFR price is comparing two different things.

FOB — Free On Board: The seller delivers the goods on board the vessel at the named load port and clears them for export. Risk and cost transfer to the buyer once the cargo is loaded, so the buyer arranges and pays for ocean freight and insurance.
CFR — Cost and Freight: The seller pays for carriage to the named destination port, but risk transfers to the buyer when the goods are loaded at origin. The seller does not insure the cargo — that gap between cost and risk is the difference buyers most often miss.
CIF — Cost, Insurance and Freight: As CFR, but the seller also buys marine insurance for the voyage. Risk still transfers on loading at origin; the buyer simply has a policy to claim against. Standard minimum cover is Institute Cargo Clauses (C) unless the contract says otherwise.
DAP — Delivered At Place: The seller bears cost and risk all the way to the named destination, ready for unloading. Import clearance and duties remain the buyer’s responsibility.
EXW — Ex Works: The buyer collects from the seller’s premises and handles everything thereafter, including export clearance. Rare in cross-border commodity trade because the buyer carries obligations it usually cannot discharge in the seller’s country.
Laycan: The window of days within which the vessel must arrive and be ready to load. Miss the laycan and the charterer may cancel; arrive early and the vessel waits at the buyer’s or seller’s expense depending on terms.
Demurrage: A daily charge payable when loading or discharging takes longer than the agreed laytime. On bulk cargoes it can move the economics of a shipment materially, which is why laytime terms belong in the contract, not the covering email.

Quality, inspection and reporting

Physical trade turns on whether the material that arrives matches the material that was sold. These are the instruments that decide it.

CoA — Certificate of Analysis: The laboratory document stating the measured composition of a specific parcel — purity, contaminants, moisture. It refers to the lot actually shipped, unlike a typical or datasheet analysis which describes what a plant usually produces.
Pre-shipment inspection: Independent verification of quality, weight and packing at the load port before the cargo sails, typically by SGS, Intertek, Bureau Veritas or CIQ. It is the buyer’s main protection because a claim after discharge is far harder to enforce.
Assay: The analytical determination of metal content in an ore, concentrate or refined product. Buyer and seller assays commonly differ slightly; contracts usually set a tolerance and appoint an umpire laboratory to settle disputes beyond it.
JORC Code: The Australasian standard for publicly reporting exploration results, mineral resources and ore reserves, governing disclosure for ASX-listed companies. A resource signed off by a competent person under JORC 2012 is the baseline serious mining investors expect.
NI 43-101: The Canadian equivalent of JORC, governing technical disclosure for issuers listed in Canada. JORC and NI 43-101 are broadly comparable in intent, and either is generally acceptable to institutional capital.
GKZ / B+C1: Soviet-era resource classification still used across parts of Central Asia and the Caucasus. Workable, but usually needs conversion or independent review before Western institutional investors will engage with the numbers.

Specifications you will see on contracts

Grade names carry precise meanings. Getting one wrong is the most common cause of a rejected cargo.

SHG — Special High Grade: Zinc of 99.995% minimum purity, the standard grade for galvanising and die-casting, specified under ASTM B6. Anything below this is a lower commercial grade and prices differently.
P1020A: The benchmark primary aluminium grade: 99.7% minimum aluminium with tightly capped iron and silicon. The reference quality behind most LME-linked aluminium ingot contracts.
Biuret: An impurity formed when urea is overheated during production. It matters because high biuret damages foliage in leaf-applied fertilizer — agricultural urea is normally capped at 1% maximum, with tighter limits for foliar use.
Fe 62%: The reference iron content for seaborne iron ore fines and the basis of the main published index. Cargoes above or below the reference settle against published premiums and discounts rather than a flat renegotiation.
DSO — Direct Shipping Ore: Ore of high enough grade to be shipped and used with only crushing and screening — no beneficiation. Cheaper to bring to market than magnetite, which must be concentrated first.
Spodumene concentrate: The hard-rock lithium product, typically around 6% Li2O, produced from Australian and other pegmatite mines and shipped to converters that turn it into lithium hydroxide or carbonate.
Penetration grade: Bitumen classified by how far a standard needle penetrates the sample at 25 °C, written as 60/70 or 80/100. Lower numbers mean harder bitumen; 60/70 is the global paving workhorse.
AUS 32: The ISO 22241 specification for automotive urea solution — 32.5% high-purity urea in demineralised water, sold as AdBlue or diesel exhaust fluid. Fertilizer-grade urea cannot be substituted because its additives poison the SCR catalyst.

Pricing, payment and structure

Commodities are rarely sold at a list price. These are the mechanisms that set the number and secure the money.

LME — London Metal Exchange: The pricing reference for base metals including aluminium, copper, zinc and tin. Most physical contracts are written as the LME cash or three-month price plus or minus a negotiated premium reflecting grade, location and delivery terms.
LBMA — London Bullion Market Association: Sets the standards and reference prices for precious metals. Silver and gold contracts are typically written against the LBMA price for a stated pricing date, with delivery quoted loco a named vault city.
Offtake agreement: A long-term contract under which a buyer commits to purchase an agreed share of a project’s future production. For a mine, an offtake is often what makes financing possible, because it converts uncertain future output into contracted revenue.
Prepayment: Capital advanced against a future offtake, repaid in product rather than cash. Frequently the fastest funding route for a producing or near-producing mine, and usually less dilutive than equity because the financier is underwriting the commodity and the logistics.
QP — Quotational Period: The defined period whose average exchange price sets the contract price — for example the month following shipment. Because prices move during transit, the QP determines who carries that exposure.
Provisional payment: An initial payment, commonly 80–90% of estimated value, released against shipping documents, with the balance settled once final weights and assays are agreed at discharge. Standard practice for concentrates.
LC — Letter of Credit: A bank undertaking to pay the seller once compliant documents are presented. It substitutes the bank’s credit for the buyer’s, which is why it remains the default instrument between counterparties trading together for the first time.
Bill of lading: The document issued by the carrier that serves as receipt for the cargo, evidence of the contract of carriage, and — critically — a document of title. Whoever holds the original endorsed bill controls the goods.
KYC / KYB: Know Your Customer and Know Your Business: verification of identity, ownership and sanctions status of a counterparty before contracting. A cargo can be frozen mid-voyage over a party that should never have entered the chain.

Mining and project terms

Vocabulary that appears when the transaction is an asset rather than a cargo.

Farm-in / earn-in: An agreement under which an incoming party earns a percentage interest in a project by funding exploration or development expenditure, rather than paying the vendor cash. Usually staged, so the investor can stop at each decision point.
Tenement: The Australian term for a granted mining title — an exploration licence, mining lease or similar. Minimum expenditure and reporting obligations attach to the tenement itself, and failing them risks forfeiture regardless of any joint venture agreement.
Unincorporated JV: The traditional Australian mining structure, in which each participant holds a direct legal interest in the tenements and takes its share of production in kind rather than owning shares in a company.
Sole risk and dilution: The mechanism applied when one participant declines to fund a programme: the funding party proceeds alone and the non-contributing party’s interest is reduced by an agreed formula, often converting to a royalty below a threshold. In practice this clause decides who controls a project.
FIRB — Foreign Investment Review Board: The Australian body that reviews acquisitions of land and mining interests by foreign persons. Approval is routine for most commercial transactions, but foreign government investors are reviewable regardless of value and critical minerals draw closer scrutiny.
ILUA — Indigenous Land Use Agreement: A registered agreement between a project and native title parties in Australia covering access, compensation, employment and heritage protection. Existing agreements transfer with the project and bind an incoming joint venture partner.

Ask the desk directly.

If a clause in an offer you have received does not read the way you expected, send it over. We would rather explain a quotational period than see a contract signed on a misunderstanding.

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