Understanding the challenges and risks of concentrates trading
Concentrates trading faces many of the same risks and challenges as all commodity trading – adapting to an ever-changing, fast-paced world, complying with new rules and regulations, and price and performance risks.
In addition, concentrates trading is more complex and nuanced than other commodities. Yet, very often, companies are entering complex formulae and processes relating to concentrates trading into generic CTRM systems designed for oil trading, using the system in tandem with external spreadsheets and documents. This introduces real potential for delay and error.
It also results in silos of expertise, with companies relying on spreadsheets that one person has designed and nobody else understands. What happens when there's an issue with the spreadsheets and they no longer calculate the correct formula? What happens if the spreadsheet owner leaves or goes on holiday?
A system that’s not specifically designed for concentrates forces users to make assumptions or approximations outside the system, working from their best guess of what they think the delivery criteria will be when they’re entering the contract into the system. This is far from ideal in a fast-moving, regulated global business.
Multiple data sources, sometimes of questionable quality, present a risk to efficient and compliant concentrates trading. A spokesman at a commodity trading firm that specialises in non-ferrous ores, concentrates, refined and precious metals and by-products, identifies major challenges as efficient data entry and the need for a single source of data to power fast and data-driven decisions.
“If you trade in oil, the contracts are very similar, but for concentrates there can be differences. So you have to be able to capture and display all these nuances within the CTRM system. And if you have a system that's not specifically designed for concentrates, it's impossible.”
David Glasspool
Head of Sales & Marketing at Amphora
