How different pricing dates and averages can create copper exposure even when both purchase and sale contracts reference the LME.
A purchase priced on shipment date and a sale priced on a monthly average both reference copper, but they are not economically matched. Market movement between the two pricing mechanisms can change trader margin.
The first control is contractual: align benchmark, quotation period, currency and pricing events where commercially possible. This is a physical hedge.
If the commercial contracts cannot be fully aligned, identify the remaining benchmark exposure and evaluate an appropriate financial hedge with authorised market counterparties.
Where a physical contract is priced against a monthly average, the hedge should reflect that averaging convention as closely as practicable to reduce time-basis risk.
Quantity tolerance, assay adjustment and shipment delay can change the size or timing of the exposure. Hedge governance should define when positions can be resized.