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Commodity risk management

Limit the effect of commodity price fluctuations on your business

Planning for the unexpected is an essential element of your business strategy. A commodity price hedging strategy is one of the ways that can help your business guard against pricing uncertainty by limiting the effect of price movements or the impact of commodity price shocks.

A commodity price swap allows you to fix a commodity price for a specified future period. Not only does this help you plan ahead for your business, but it limits the effects of any price movements. Price caps and swaps are available in energy, base metals and agriculture commodities.

Please be aware that there are certain foreign exchange and currency interest rate and commodity products offered by Treasury Solutions that may prevent, either in part or full, the opportunity to benefit from any favourable changes in the underlying market.

  • Pre-planning – allowing your business to better budget commodity cost or revenue in advance
  • More control – reduce the financial impact of commodity price shocks
  • Comfort - in the knowledge that your exposure to price movements is limited
  • Tailoring – structure the most appropriate risk protection solution to your individual needs
  • Limitation – you will no longer be able to participate in favourable commodity price movements beyond certain levels
  • Available for a variety of commodities including, energy (ultra-low sulphur diesel (ULSD), gas oil and jet fuel), base metals (aluminium, copper, zinc, lead, nickel and tin), agricultural (wheat and sugar)
Important facts

Commodity risk management solutions are only offered to clients with commodity price exposure – trading of a speculative nature is strictly prohibited

  • All trades are cash settled. There is no physical delivery of the commodity
  • Maximum term of 5 years dependent on specific commodity
  • Minimum deal value applies, subject to status
  • You must enter into an ISDA Master Agreement, published by the International Swaps & Derivatives Association, which outlines the terms applied to the transaction, in advance of any trade execution
  • Credit line may be required. Ask relationship manager for details
  • Please be aware that by transacting certain derivative structures with us, you will no longer be able to take advantage of favourable market moves. Full details are available from your Treasury Solutions Manager
  • A break cost, which could be significant, may be payable if you seek to break the terms of the contract
  • Further information is available on request
Additional solutions

Further information

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