Commodity Research,Data & Risk Management
Raw material price forecasting plays a critical role in the strategic plan of any firm. Reports from CommodityRA empower them to create data-driven planning to avoid disruption as a result of price volatility.
CommodityRA customized hedging solutions start from the coaching of staff to Execution. We support and manage corporate Hedging needs with Indian Exchanges like MCX, NCDEX and global exposure at LME, CME,SICOM.
CommodityRA advises support and providing solutions for physical trading in selected commodities. This includes arbitrage, proprietory trading.
Data is new energy, Commodity price data are critical. We provide Derivative data, collected physical market data, and scrap price data with analysis.
Industries We Serve
CommodityRA is a price Risk Management and data provider firm with innovative solutions. We work closely with Commodity Exchanges, Producers, Brokers, and Financial institutions to support and master the art of Price risk management.
It is hardly difficult to stay with the jewelry business without a proper inventory hedging mechanism. The risk factor and hedge effectiveness are high for the Gold and silver market. Different types of hedging tools or methods have been developed by CommodityRA for both jewellery manufactures and retailers. Besides Futures, options have also used as an effective tool in our system.
India has the world's largest expansion plan for renewable energy. This sector creates huge demands for OEM and finished products from Copper, Aluminium, steel, zinc, etc. But a volatile raw material/underlying commodity price will derail the project and planned budget. We have developed tools and mechanisms to manage the risk that arises due to price volatility.
India has become the preferred designing and manufacturing base for most global auto OEMs and is set to become the 3rd largest in the world by 2025. As the largest consumer of steel, natural rubber, Nonferrous metals like Copper, Aluminium, Zinc, Lead, Nickel, and EV materials like Cobalt& Nickel auto industry has faced challenges with raw material price risk and would increase in an EV era.CommodityRA has tailored Risk control solutions for the auto industry.
The fertilizer and power sector faces turbulence with the volatile character of Natural gas prices. As a low carbon emission fossil fuel and increased Gas pipeline facilities more industries are looking for Natural Gas. Since risk management is the key area for its users, CommodityRA has developed hedging strategies on highly structured derivative products to hedge exposure in Indian and International exchanges.
Methodology of Price Risk Management
Commodities underlying related to the raw materials are subjected to price volatility. This sometimes may create a huge variation in projected EBITDA. Derivative instruments have been used as a better risk management tool than traditional concepts but they should go through a systematic method.
Measuring Commodity price risk
To find the correlation between raw material and commodity price to mitigate risk with the end product/project cost.
- To control commodity price fluctuation impact on business
- Sensitivity Analysis and Value at Risk(VaR) method
- Selection and viability of derivative instrument to mitigate risk
Analytics to find price Projections & Exposure
Yearly and quarterly commodity price forecast with impact on raw material. A systematic approach to asses the firm's net exposure on each commodity.
Our web platform helps you to analyze the historical, seasonality, and spread price analysis. Simulate a hedging strategy and calculate net exposure to a company based on projected input.
Hedge strategy setup and execution
To set up a hedge desk and smooth implementation of risk management process involve below-mentioned actions
- To decide on a suitable exchange and derivative instrument
- To finalize a suitable broker and a dealing method
- To coach the staff in managing all processes related to hedging.
- To monitor and advise hedging activities.
Draft governance and policies for hedging
The Risk management of a company needs a well-encrypted risk policy and efficient governance structure to execute, review and approve all activities.
CommodiyRa will draft a Risk Policy (on Raw material price risk Management ) for the organization. We recommend setting up three layers of the risk management team, like the Risk committee as the top layer, the risk review team at the middle, and the Risk execution team on the lower level. Important decisions and executions will be implemented only after necessary approvals.
Frequently Asked Questions
Basics if your company has directly or indirectly exposed to any of the commodity price volatility
Why Commodity Risk Management?
Commodity risk management means reducing uncertainty by controlling risk factors since it is impossible to predict the outcome of an uncertain event. However, To effectively manage commodity risks, having the relevant risk management framework with the right people with the right tools, needs a clear vision of the state of the business and the risks associated with it.
What is hedging and does my firm need it?
Hedging in financial markets means technically entails offsetting trades in instruments with negative correlations. Essentially, a risk reduction will always mean a reduction in potential profits. The principle is simple if the asset you are hedging against makes money, your profits are fixed, BUT if the assets lose money, your hedge, if successful, will reduce that loss.
My frm doesn't purchase commodities directly?
Most Companies are not directly exposed to commodities but the finished /end raw materials (OEM) are subjected to price risk from the underlying. Like a copper cable manufacture will increase the price with the high copper price. So the better option is to get a good hedge book.
What is Price Volatility and how does it affect my business?
Volatility is the increase or decrease in the price of an asset most beyond a predicted range. For example, if Copper is 35% volatile means, a company with 100CR yearly exposure to copper may face a maximum of up to 35Cr risk on EBITDA if the price goes completely against the budgeting.
What are the different types of risk management solutions?
There are different types of traditional risk management tools are available like arrangement with vendors, replacing a possible low-cost raw material, etc. But the most professional one is hedging with financial derivative instruments.
What are commodities and Exchanges you Deal with?
We are dealing with commodity derivatives in Gold, silver in bullion, Nonferrous metals, Grains, CrudePalm oil & soya oil, Rubber Etc. We deal with Indian commodity exchanges like MCX and NCDEX and global exchanges like LME, SICOM, CME, etc.
If you would like to explore the Commodity price risk management using derivatives or likes to entertain an online demo about how CommodityRA can help you to control raw material cost
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