Commodity Trading

The report examines the business models of commodity trading companies, specifically those dealing in non-fuel minerals, and identifies potential tax risks for host countries. It finds that while most trading is conducted at arm's length, risks emerge from profit-based fiscal instruments, opaque corporate structures, and specific financing arrangements like metal streaming. The authors recommend strengthening legal frameworks through mandatory contract registration, the use of globally recognized prices for tax calculations, and increased financial disclosure requirements for private trading firms.

• Commodity trading companies act as essential intermediaries, handling between 20% and 40% of the total international trade for key metals including iron ore, copper, nickel, and zinc.
• The tax risks created by these companies are primarily linked to profit-based fiscal instruments and are generally not materially different from risks created by any other mineral exporter or importer.
• Metal streaming agreements pose significant risks to host country tax bases because they often involve fixed prices far below market value, transferring potential windfalls from the mining company to the investor.
• The sector is characterized by a systemic lack of transparency, as many trading companies are privately held and not required to publish financial data, which facilitates corruption and tax avoidance.
• There is a notable eastward shift in the geography of commodity trading, with China becoming a dominant player due to its role as the largest importer of minerals and metals.
• To mitigate tax risks, the report recommends that host countries legislate the use of globally recognized prices for calculating royalties and income tax, independent of the actual sales price in a contract.
• The report suggests that home countries should mandate greater public financial disclosure for privately owned trading companies to help host countries evaluate risks.

APA

Löf, A., & Ericsson, M. (2019). Commodity Trading. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/commodity-trading-challenges.pdf

Chicago

Löf, Anton, and Magnus Ericsson. Commodity Trading. International Institute for Sustainable Development, 2019. https://www.iisd.org/system/files/publications/commodity-trading-challenges.pdf.

Wikipedia

{{cite report |last1=Löf |first1=Anton |last2=Ericsson |first2=Magnus |title=Commodity Trading |publisher=International Institute for Sustainable Development |date=May 2019 |url=https://www.iisd.org/system/files/publications/commodity-trading-challenges.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lf2019commodity, author = {Löf, Anton and Ericsson, Magnus}, title = {{Commodity Trading}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = may, url = {https://www.iisd.org/system/files/publications/commodity-trading-challenges.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }