Commodity trading refers to the buying and selling of raw materials and primary products — including metals and minerals such as gold, iron ore, bauxite, aluminium, and diamonds — in financial and physical markets, with participants seeking to profit from price movements, manage supply chain risk, or secure raw material supply for industrial processes. In the mining sector, commodity trading encompasses both physical trading — where actual consignments of ore, concentrate, or refined metal change hands — and financial trading through derivatives instruments such as futures contracts, options, and swaps listed on exchanges like the London Metal Exchange (LME) or CME Group. Mining companies engage in commodity trading for a variety of strategic and risk management purposes. Revenue hedging programmes use futures and options to lock in forward prices for anticipated production, protecting cash flows against commodity price declines. Offtake agreements and term contracts provide revenue certainty and underpin project financing. Commodity trading houses and financial institutions also participate in mining commodity markets as intermediaries and speculators, providing liquidity and price discovery functions that are important for the efficient functioning of global mining supply chains.
