Commodity Exposure Reports

When commodity prices fluctuate, companies have an exposure risk. Hedging provides a way to manage that risk. For example, companies may have policies to hedge all despatch orders (DOs) to 50%-70% of their value.

However, the quantity and value of DOs can change. Deliveries might only partially be fulfilled, resulting in a lower quantity of material. Deliveries may be delayed, and the values might then be calculated based on prices in a different month.

Hedge positions for these DOs must be adjusted if they no longer meet the company's hedging policy. Hedge positions may be unwound, or carried forward/back.

In MineMarket, commodity exposure can be managed via the Hedging Explorer for single quotation periods (QPs), or via the Commodity Exposure report for multiple QPs.

Inclusions

The commodity exposure report displays DOs, quotas and repurchase actions with quotation periods within a date range, and compares their commodity quantities with hedging allocations.

In addition to matching the search criteria of the report:

  • DOs must:
    • Not be child despatch orders
    • Not have Ignore for Hedging checked
    • Not belong to a quota that has Hedging Required checked
    • Not be cancelled
    • Have a selectable (or no) status
    • Have a snapshot calculated by the MineMarket Marketing Service
  • Quotas must:
    • Have Hedging Required checked
    • Have a snapshot calculated by the MineMarket Marketing Service
  • Repurchase actions must have a snapshot calculated by the MineMarket Marketing Service

Instead of hedging an entire DO or quota, it is also possible in MineMarket to hedge a quotation pricing line. These allocated quantities are included in the commodity exposure report.

In order to hedge despatch order QP line overrides, they must:

  • Be for a DO that is not a child despatch order
  • Be for a DO that does not have Ignore For Hedging checked
  • Be inherited from either a contract-level set of contract terms, or from an override set of contract terms for a quota that does not have Hedging Required checked
  • Have the Weighting Type of the QP header set to Quantity
  • Have the Weighting Value specified

In order to hedge quota QP lines, they must:

  • Be within a contract with product pricing
  • Be within an override set of contract terms for a quota that has Hedging Required checked
  • Have the Weighting Type set to Quantity and the Weighting Reference set to Quota Quantity in the quotation pricing header
  • Have the Weighting Value specified

Hedge positions must be locked and have a selectable (or no) status to be included in the commodity exposure report. Withdrawn options contracts are excluded. Executed options contracts are also excluded; however, their related futures contracts are included.

Results

The commodity exposure report displays one row for each applicable DO, quota and repurchase action.

For each DO, quota or repurchase action, the report displays the exposure for each QP. More detailed information is available in a tooltip. The tooltip displays the:

  • Quantity of the DO, quota or repurchase action for that QP—Negative for sales contracts and open actions; positive for purchase contracts and buyback actions.
  • Allocated Quantity to hedge positions for that QP—By default for futures, spread and swaps contracts, positive if Transaction Type is Buy; and negative for Sell. By default for options contracts, a bought call option or sold put option allocation is positive and a sold call option or bought put option allocation is negative. The sign of the allocation can be inverted from the default if required.
  • Quantity at Risk (the exposure)—The difference between the quantity and the allocated quantity.
  • Hedged Percentage—The allocated quantity divided by the DO/quota/repurchase quantity multiplied by 100.

Below the DOs, quotas and repurchase actions, a row displays the Unallocated Quantity of hedge positions for each QP. This aggregated quantity includes the unallocated quantity of any hedge positions that are not allocated or that are partially allocated.

The summary rows display information for each QP:

  • Despatch Order / Quota Quantity—Negative for net sales; positive for net purchase
  • Allocated Quantity—Positive for net buy; negative for net sell
  • Risk—The DO/quota/repurchase quantity minus the allocated quantity
  • Hedged Percentage—The allocated quantity divided by the DO/quota/repurchase quantity multiplied by 100