Lapasar
Spend & Cost Management

Commodity Pricing

Commodity pricing is the pricing of goods whose cost is driven largely by fluctuating market rates for underlying raw materials rather than individual supplier negotiation.

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For commodities such as metals, fuel, plastics or agricultural inputs, prices move with global and regional markets, so a large part of the cost is outside any single supplier's control. Buyers of goods with high commodity content need to understand these movements, because they flow through to the prices they are quoted.

Managing commodity pricing means tracking the relevant indices, timing purchases where possible and using contract mechanisms such as price indexation or hedging to share risk fairly. Recognising the commodity component within a quoted price also sharpens negotiation, separating the market-driven element from the supplier's margin and conversion cost.

Frequently asked questions

What is commodity pricing?
Commodity pricing is the pricing of goods whose cost is driven mainly by fluctuating market rates for raw materials such as metals or fuel, rather than by individual supplier negotiation.
How do buyers manage commodity price risk?
By tracking relevant market indices, timing purchases, and using contract mechanisms such as price indexation or hedging to share the risk of price movements fairly with suppliers.

Go deeper

Supplier price index (Malaysia)

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