Reference

Commodity trading glossary.

The vocabulary that appears on contracts, inspection certificates and term sheets in physical commodity trade — 37 terms defined plainly, with the practical consequence rather than just the expansion of the acronym.

Incoterms and delivery Quality, inspection and reporting Specifications Pricing, payment and structure Deal flow and documents Mining and project terms

Incoterms and delivery

Who pays for what, and where risk changes hands. The rules that decide whose problem a cargo is at any given moment.

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. What is FOB? →
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. What is CFR? →
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. What is CIF? →
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. What is DAP? →
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. What is EXW? →
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. What is laycan? →
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. What is demurrage? →

Quality, inspection and reporting

How a parcel is proven to be what the contract says it is, and how mineral resources are reported to investors.

SGS — Société Générale de Surveillance: The largest independent inspection, testing and certification company in the world, founded in 1878 and headquartered in Geneva. In commodity trade its certificates of quality and weight are what a buyer, a bank and an insurer all rely on instead of taking the seller’s word. What is SGS? →
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. What is a Certificate of Analysis? →
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. What is pre-shipment inspection? →
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. What is an assay? →
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. What is the JORC Code? →
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. What is NI 43-101? →
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. What is GKZ / B+C1 classification? →

Specifications

The grades and thresholds that set a price. Getting one of these wrong changes what you receive, not just what you pay.

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. What is SHG zinc? →
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. What is P1020A aluminium? →
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. What is biuret? →
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. What is Fe 62%? →
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. What is DSO? →
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. What is spodumene concentrate? →
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. What is penetration grade bitumen? →
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. What is AUS 32? →

Pricing, payment and structure

Exchanges, payment instruments and the contract structures that move cargo before anyone has been paid.

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. What is the LME? →
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. What is the LBMA? →
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. What is an offtake agreement? →
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. What is a prepayment? →
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. What is a quotational period? →
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. What is a provisional payment? →
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. What is a letter of credit? →
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. What is a bill of lading? →
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. What are KYC and KYB? →
T/T — Telegraphic Transfer: A bank-to-bank wire sent over SWIFT. It is the simplest way to pay for a cargo and the one with the least protection: the money moves on the strength of the relationship, not against documents, and once it has gone it is very hard to recall. What is T/T (telegraphic transfer)? →

Deal flow and documents

The paperwork that travels between a first enquiry and a signed contract. Some of it binds someone to something; a good deal of it does not.

LOI — Letter of Intent: A non-binding note from a buyer setting out what it wants to buy and on what terms. It commits nobody to anything, and its real function is to open a conversation in enough detail that the seller can tell whether the enquiry is serious. What is an LOI (letter of intent)? →
ICPO — Irrevocable Corporate Purchase Order: A buyer’s purchase order, issued on company letterhead and described as irrevocable. Despite the name it binds nobody until a seller accepts it, and in physical commodity trading it functions as a more formal-looking letter of intent. What is an ICPO (irrevocable corporate purchase order)? →
FCO — Full Corporate Offer: A seller’s complete offer to sell a stated cargo on stated terms, valid for a stated period. Unlike a soft offer it is meant to be firm within its validity, and it is the document a buyer can reasonably act on. What is an FCO (full corporate offer)? →
SCO — Soft Corporate Offer: A seller’s indicative offer, describing what it expects to be able to supply and on roughly what terms, subject to confirmation. It is a starting point for negotiation rather than something a buyer can accept. What is an SCO (soft corporate offer)? →
POP — Proof of Product: A set of documents offered by a seller to show that the cargo exists and is available to the buyer. What counts as proof varies enormously, and much of what circulates under the name proves nothing at all. What is proof of product (POP)? →
NCNDA — Non-Circumvention, Non-Disclosure Agreement: An agreement not to bypass an introducing party or disclose what it has shared. Widely used by intermediaries to protect a commission, and considerably harder to enforce than its popularity suggests. What is an NCNDA? →
SPA — Sales and Purchase Agreement: The contract itself — the first document in the sequence that actually binds the parties. Everything exchanged beforehand is superseded by it, and any term not carried into it has no effect. What is an SPA (sales and purchase agreement)? →
BCL — Bank Comfort Letter: A letter from a buyer’s bank indicating the buyer has funds or capacity for a transaction. It is not an undertaking to pay, carries no liability for the bank, and is treated with corresponding scepticism. What is a BCL (bank comfort letter)? →
RWA — Ready, Willing and Able: A message, usually by SWIFT, in which a buyer’s bank indicates it is ready, willing and able to proceed with a specified instrument. Its value depends entirely on the SWIFT message type used. What is an RWA (ready, willing and able)? →
Performance bond — PB: A bank guarantee, normally one to two per cent of contract value, that pays the buyer if the seller fails to perform. It is the seller’s counterweight to the buyer’s letter of credit. What is a performance bond? →
TTV — Tank-to-Vessel: The transfer of a petroleum product straight from a shore storage tank into a nominated vessel at the berth. It is a delivery procedure rather than a commercial term, and the sequence of inspections and authorisations around it is where the trade is actually secured — or lost. What is TTV (tank-to-vessel)? →

Mining and project terms

The vocabulary of mine ownership, joint ventures and the approvals that decide whether a project can proceed.

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. What is a farm-in agreement? →
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. What is a mining tenement? →
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. What is an unincorporated joint venture? →
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. What is sole risk and dilution? →
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. What is FIRB? →
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. What is an ILUA? →

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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