# How commodities move: Key terms, quiz and sources

Source page: https://www.materialinsights.org/learn/commodities/how-commodities-move/review/

[Understanding Commodities](https://www.materialinsights.org/learn/commodities/) / [Module 7: How commodities move](https://www.materialinsights.org/learn/commodities/how-commodities-move/) Wrap-up

## How commodities move: review

### Key terms

**Traded share**
: Exports as a percentage of world production, a measure of how global a commodity's market is.

**Harmonized System (HS)**
: The international customs classification, comparable across countries down to about 5,000 six-digit products.

**FOB (free on board)**
: The value of goods loaded at the exporter's port, excluding the voyage; exporters usually report trade this way.

**CIF (cost, insurance and freight)**
: The value of goods delivered at the importer's border, including freight and insurance; importers usually report trade this way.

**CFR (cost and freight)**
: A delivered price including freight but not insurance, used for example in the iron ore benchmark delivered to China.

**Mirror statistics**
: The two reports of one bilateral flow, by exporter and importer, whose gaps reveal valuation, errors and missing reporters.

**BACI**
: CEPII's reconciled trade database, which strips estimated freight from imports and weights each report by the reporter's reliability.

**Re-export hub**
: A country such as Switzerland, the Netherlands or Singapore whose trade reflects refining, processing or transit rather than its own output.

**Deadweight tonnes (dwt)**
: The weight a ship can carry, including cargo, fuel and stores; the standard measure of ship size.

**Capesize**
: Dry bulk carriers too large for the Suez Canal, carrying roughly 140,000-175,000 tonnes of ore or coal depending on the source.

**VLCC**
: Very large crude carrier, a tanker of up to about 350,000 tonnes or 2 million barrels.

**Forward freight agreement (FFA)**
: A private contract that fixes the freight rate on a route for a future date, used to hedge charter rate risk.

**Chokepoint**
: A strait or canal through which a large share of a commodity's seaborne trade must pass.

**Tariff escalation**
: Import duties that rise with the stage of processing, giving processing in the importing country a high effective protection.

**Effective rate of protection**
: The tariff expressed as a share of the value added at a processing stage rather than of the product's price.

**Export restriction**
: An export tax, quota, ban or licence requirement that keeps supply at home and raises the world price.

**Secondary sanctions**
: Penalties on third-country firms that deal with a sanctioned party, enforced through access to the US financial system.

**Monoeconomy**
: In Radetzki and Wårell's definition, a country where one non-fuel commodity makes up 40% or more of exports.

**Dutch disease**
: The shrinking of other tradable sectors when a resource boom raises wages and the real exchange rate.

**Resource nationalism**
: Host-government policies that assert ownership or control over resources and push processing into the producing country.

### Try it in the table

- Open [Potash](https://www.materialinsights.org/commodities/potash/) and compare world imports with world exports in the trade panel, then compare the export shares with the production table. Which producers are missing from the export side, and how large a share of world output do they mine?
- Open [Iron ore](https://www.materialinsights.org/commodities/iron_ore/) and [Soybeans](https://www.materialinsights.org/commodities/soybeans/). For each, divide reported imports by reported exports. Explain why the ratio is about 1.2 for ore and about 1.0 for beans, using value per tonne and the FOB/CIF distinction.
- Open [Nickel](https://www.materialinsights.org/commodities/nickel/). Compare Indonesia's share of mine production with the leading exporters of nickel ore (HS 2604), and note who imports ore. What does the pattern tell you about where the export ban moved processing?
- Open [Cocoa](https://www.materialinsights.org/commodities/cocoa/) and [Coffee](https://www.materialinsights.org/commodities/coffee/). Find a country that ranks high in imports or exports but grows little of the crop. Using tariff escalation, explain why grinding and roasting cluster there.
- Open [Wheat](https://www.materialinsights.org/commodities/wheat/) and [Rice](https://www.materialinsights.org/commodities/rice/). Compare the leading exporters in the trade panel with what you know of Russian and Indian export policy. Which tile's market would be hit harder by a ban from its largest exporter, and why?
- Open [Crude oil](https://www.materialinsights.org/energy/crude_oil/) and [Natural gas](https://www.materialinsights.org/energy/natural_gas/). Identify the leading LNG and crude exporters whose cargoes must pass the Strait of Hormuz, and estimate roughly what share of 2024 export value that represents.

### Final quiz

Which commodity had the highest traded share of world output in Radetzki and Wårell's 2018 comparison?
 Natural rubber reached 88%, because it grows in the tropics and is used mainly in temperate industrial countries. Wheat was 24%, steel 27% and rice 10%.

Reported world imports of a product are 21% higher than reported exports. Which explanation should you test first for a cheap bulk ore?
 For low value-per-tonne cargoes on long routes, freight and insurance are a large share of CIF value; missing exporters and timing explain the rest.

Why did Radetzki and Wårell's two transport revolutions matter beyond the volume of trade?
 Globalisation means price convergence as well as flows. Each spurt opened distant supplies and removed the shelter that distance gave local producers.

A laden VLCC heading from the Gulf to the Mediterranean through Suez typically does what?
 Conway explains that a fully laden VLCC is too deep for Suez, so it lightens via the pipeline and picks the oil up again in the Mediterranean.

Why did the 1973 embargo on the United States and the Netherlands fail to single them out?
 Yergin describes the companies' policy of 'equal misery'. Radetzki and Wårell note that without political regulation, markets reroute supply towards embargoed nations.

In 2009 cocoa beans entered the EU duty free while chocolate paid 32%. If beans make up $80 of a $100 chocolate product, what is the effective protection of EU chocolate making?
 The $32 duty falls on $20 of value added, so effective protection is 160%. Escalation keeps processing in the importing country.

Which statement about Indonesia's nickel policy is correct?
 Indonesia mined 62% of world nickel in 2024 and an estimated 2.6 of 3.9 million tonnes in 2025. Ore is processed at home, so the Philippines leads ore exports. The 2017 easing was reversed by the 2020 ban.

What does the Dutch disease mechanism predict during a resource boom?
 Boom income raises demand; tradables are priced abroad but non-tradables and wages are bid up, squeezing farming and manufacturing, as in Nigeria in the 1970s.

[Next module: Criticality and geopolitics →](https://www.materialinsights.org/learn/commodities/criticality-and-geopolitics/)

### Sources for this module

- Radetzki, M. & Wårell, L. (2021). A Handbook of Primary Commodities in the Global Economy, 3rd ed. Cambridge University Press. · pdf pp. 23-29, 42-63, 66-82, 124, 199-204, 267-298
- Gaulier, G. & Zignago, S. (2010). BACI: International Trade Database at the Product-level, the 1994-2007 Version. CEPII Working Paper No. 2010-23. [web ↗](http://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=37) · pdf pp. 3, 7-20
- Geman, H. (2005). Commodities and Commodity Derivatives. Wiley. · pdf pp. 14-15, 28-31
- Smil, V. (2016). Still the Iron Age: Iron and Steel in the Modern World. Butterworth-Heinemann. · pdf pp. 125, 183, 185
- Humphreys, D. (2015). The Remaking of the Mining Industry. Palgrave Macmillan. · pdf pp. 74-75, 126, 183-191, 237
- Conway, E. (2023). Material World: A Substantial Story of Our Past and Future. WH Allen. · pdf pp. 140, 276-278
- Yergin, D. (1991). The Prize: The Epic Quest for Oil, Money, and Power. Simon & Schuster. · pdf pp. 830-831, 856-858, 965-966, 1049, 1061-1063, 1072-1073, 1081, 1313-1314
- Morgan, D. (1979). Merchants of Grain. Viking. · pdf pp. 227-232, 277, 311, 337-339, 364, 400, 431-433, 441
- Pirrong, C. (2014). The Economics of Commodity Trading Firms. Trafigura. · pdf pp. 7-8, 28, 44-46
- Blas, J. & Farchy, J. (2021). The World for Sale: Money, Power and the Traders Who Barter the Earth's Resources. Random House Business. · pdf pp. 39, 105, 236-237, 296-301, 356
- Pitron, G. (2020). The Rare Metals War: The Dark Side of Clean Energy and Digital Technologies. Scribe. · pdf pp. 73-80, 95-96
- Tilton, J. E. & Guzmán, J. I. (2016). Mineral Economics and Policy. RFF Press / Routledge. · pdf pp. 208-214
- Erten, B. & Ocampo, J. A. (2012). Super-cycles of commodity prices since the mid-nineteenth century. UN DESA Working Paper No. 110. [web ↗](https://www.un.org/en/development/desa/papers/2012/wp110_2012.pdf) · pdf pp. 25-26
- U.S. Geological Survey (2026). Mineral Commodity Summaries 2026. [web ↗](https://pubs.usgs.gov/publication/mcs2026) · Introduction (Table 4, Export Control on Mineral Commodities); Cobalt; Gallium; Nickel
- U.S. Department of Agriculture (2026). World Agricultural Supply and Demand Estimates, WASDE-676, October 2026. [web ↗](https://www.usda.gov/oce/commodity/wasde) · World Wheat, Rice and Soybean Supply and Use tables
- Energy Institute. Statistical Review of World Energy. [web ↗](https://www.energyinst.org/statistical-review) · Russian pipeline gas exports to Europe, 2019 and 2024

## Other sections

- [Module overview](https://www.materialinsights.org/learn/commodities/how-commodities-move/index.md)
- [Who ships what to whom](https://www.materialinsights.org/learn/commodities/how-commodities-move/p1/index.md)
- [Reading trade data](https://www.materialinsights.org/learn/commodities/how-commodities-move/p2/index.md)
- [The economics of moving bulk](https://www.materialinsights.org/learn/commodities/how-commodities-move/p3/index.md)
- [Chokepoints, embargoes and sanctions](https://www.materialinsights.org/learn/commodities/how-commodities-move/p4/index.md)
- [Trade policy and the producing countries](https://www.materialinsights.org/learn/commodities/how-commodities-move/p5/index.md)