CME’s approach to commodity marketing is unusual, but very effective. The following example is provided to demonstrate how a client might interact with CME.
Mining company DigitUp Ltd has secured an order to ship 50,000 wet tonnes of Nickel Ore to a customer in Asia. A price of $60 per wet tonne has been agreed and the shipping logistic has been arranged. However, the customer fails to make payment and Digitup Ltd is left with no buyer and is under financial strain.
Digitup approaches CME to rescue it from its issues. A CME Consultant evaluates the DigitUp’s business process and after some consultation with the DigitUp team and the rest of the CME team makes some recommendations under a suite of services: The value of the cargo is improved and price increased by the reduction of the moisture content per tonne in a cost effective manner. To enable this outcome CME provides access to its proprietary innovative stockpiling tent system, a unique approach to sheltering bulk commodities that protects them from moisture addition during rainfall and also creates air flow within the tent that improves drying. DigitUp achieved a substantial moisture reduction from 35% to 25% of the loadable quantity. The value of the cargo increases to $75 per wet tonne.
CME agrees to be the customer and purchases the ore at a price of $68 per wet tonne giving the client an $8 per tonne price increase. Since CME is financially secure Digitup now have payment security and at the same time have mitigated the risk of liquefaction of nickel ore cargoes.