Case studies — anatomy of a trade
How a physical-commodity arbitrage actually gets identified, costed, and de-risked end to end — the landed-cost build-up, tariffs, sanctions and transboundary rules, insurance, freight, the counterparties involved, and the RFQ-to-close workflow ArbiTrade runs. Three illustrative corridors.
Steel scrap — Rotterdam → Aliağa
How the opportunity is identified
Turkey is the world’s largest ferrous-scrap importer (~18–19 Mt/yr), feeding its electric-arc-furnace (EAF) mills almost entirely on imported scrap. The arbitrage is the gap between the CFR-Turkey HMS 80:20 benchmark and what a European yard sells collected scrap for, once freight and handling are stripped out. ArbiTrade flags a corridor when (CFR Turkey benchmark − EU yard cost − landed cost) clears transaction costs with margin to spare.
Landed-cost build-up
- Buy price
- European collection-yard / exporter price for HMS 1&2 80:20.
- Ocean freight
- ~$20–35 / MT, handysize/supramax bulk, Rotterdam/ARA → Aliağa or İzmir.
- Import duty
- Turkey applies 0% customs duty on ferrous scrap — it is fed directly to EAF mills, so there is no tariff to erode the spread.
- Inspection
- Mandatory radiation scanning + material analysis at Turkish ports; pre-shipment inspection (e.g. SGS) for radioactivity and contamination.
- FX & finance
- Priced CFR in USD; cost of the letter of credit / working capital over the ~2–4 week voyage.
Compliance & sanctions
- Turkish ports run rigorous radiation detection and material-composition checks; a single radioactive or contaminated load can be rejected at the dock.
- Pre-shipment inspection certificate covering radioactivity, prohibited items, and grade conformity.
- Sanctions / KYC screening of the buying mill and the paying bank before any RFQ is dispatched.
Insurance
Marine cargo cover (Institute Cargo Clauses A) plus war & strikes; on new relationships, credit cover or a confirmed letter of credit protects the seller against non-payment.
Key risks & mitigations
- Turkish demand collapses on a TRY currency move
- Mitigation: Price CFR and keep the position short-dated; confirm mill appetite before fixing freight.
- Benchmark moves between fixing and shipment
- Mitigation: Back-to-back the buy and sell, or hedge against the CME CFR-Turkey contract.
- Quality / contamination rejection at discharge
- Mitigation: Independent pre-shipment inspection; clear grade spec in the LOI.
Counterparties involved
- Supplier: European collection yards / exporters (e.g. Netherlands, Belgium, UK yards).
- Buyer: Turkish EAF steel mills.
- Broker: ferrous scrap brokers with mill relationships.
- Finance: trade-finance bank issuing / confirming the letter of credit.
How ArbiTrade runs it
- Signal: corridor surfaces, costed net of freight, inspection, and FX.
- RFQ: structured request dispatched to vetted EU suppliers and Turkish mills.
- LOI: non-binding terms — grade, tonnage, CFR price basis, inspection, LC.
- Close: LC opened, vessel fixed, pre-shipment inspection, deal logged.
Aluminium UBC — USA Midwest → Mundra
How the opportunity is identified
India is a large and growing importer of secondary aluminium feedstock; its secondary smelters buy baled UBC to remelt. The spread is the delivered-India UBC value against a US baler’s price, once container freight, the Indian import duty, and compliance are accounted for. ArbiTrade flags the corridor when that net spread holds after the full landed-cost stack.
Landed-cost build-up
- Buy price
- US baler / exporter price for baled UBC (Midwest).
- Container freight
- FCL, US Midwest → Mundra (Gujarat); rail-to-port + ocean leg.
- Import duty
- India levies basic customs duty (~2.5% on aluminium scrap, HS 7602) plus IGST (creditable for registered importers) and applicable cess.
- BIS / QCO
- Quality-control and BIS registration requirements apply to certain metal imports; non-registration can block clearance.
- Inspection
- Pre-shipment inspection certificate (PSIC) confirming no explosives / radioactive material in the scrap.
Compliance & sanctions
- Pre-shipment inspection certificate (PSIC) is required for scrap entering India.
- BIS registration / Quality Control Order compliance for the importer where applicable.
- KYC and sanctions screening on the Indian smelter and any intermediary.
Insurance
Marine cargo cover on the container leg; optional credit cover given the documentary-collection or LC payment basis.
Key risks & mitigations
- BIS rules or import duty change mid-deal
- Mitigation: Confirm the importer’s registrations and duty position before fixing; price with a duty buffer.
- Quality — moisture, contamination, low metal yield
- Mitigation: Tight bale spec in the LOI; PSIC and, where needed, an agreed yield basis.
- Indian demand / rupee softness
- Mitigation: Short-dated position; confirm smelter appetite up front.
Counterparties involved
- Supplier: US balers / scrap exporters.
- Buyer: Indian secondary aluminium smelters.
- Broker: BIR-member metal brokers.
- Finance: trade-finance provider on a DP / LC basis.
How ArbiTrade runs it
- Signal: corridor surfaces, costed net of freight, duty, and inspection.
- RFQ: dispatched to vetted US suppliers and Indian smelters.
- LOI: grade, tonnage, CFR/CIF basis, PSIC, payment terms.
- Close: payment instrument opened, containers booked, PSIC issued, deal logged.
Battery black mass — Canada → South Korea
How the opportunity is identified
Black mass is valued on its contained metal (nickel, cobalt, lithium, manganese) less refining and recovery losses — a "payable" against benchmark metal prices. South Korea has excess hydrometallurgical refining capacity and is an active importer. The spread is the Korean refiner’s payable against a North American producer’s cost, net of freight, compliance, and assay risk.
Landed-cost build-up
- Buy price
- NA recycler / black-mass producer cost, struck as a % payable on contained Ni/Co/Li.
- Freight + hazmat
- Specialist handling; lithium content drives transport classification and packaging cost.
- Basel / OECD controls
- Black mass is increasingly classified as hazardous waste. Movements run under the Basel Convention; Canada→Korea are both OECD members, so it moves under the OECD Decision with prior notification and competent-authority consent (PIC) before shipment.
- Assay / inspection
- Independent sampling and assay of contained metal — the single biggest value driver and dispute point.
- FX & finance
- Payables priced off USD metal benchmarks; financing over notification + voyage lead time.
Compliance & sanctions
- Transboundary-waste compliance is the gating step: Basel notification and prior informed consent from origin and destination competent authorities before the cargo moves.
- Destination must be an OECD member (South Korea qualifies) for the OECD control procedure to apply.
- Hazmat transport classification for lithium-bearing material; sanctions / KYC on the refiner.
Insurance
Marine cargo cover plus environmental-liability cover appropriate to hazardous-waste movement.
Key risks & mitigations
- Regulatory classification shifts (EU made black mass hazardous in Mar 2025; China reopened imports Aug 2025)
- Mitigation: Track destination rules continuously; keep the notification current and the destination OECD-compliant.
- Assay dispute on contained metal
- Mitigation: Pre-agreed sampling protocol and umpire assay in the LOI.
- Hazmat / documentation delay
- Mitigation: Complete Basel notification and consents before fixing freight.
Counterparties involved
- Supplier: North American battery recyclers / black-mass producers.
- Buyer: South Korean hydrometallurgical refiners.
- Broker / logistics: specialist hazardous-cargo freight forwarders.
- Finance: trade-finance provider comfortable with contained-metal payables.
How ArbiTrade runs it
- Signal: corridor surfaces, payable costed against contained-metal benchmarks.
- RFQ: dispatched to vetted NA producers and Korean refiners.
- LOI: payable %, assay protocol, Basel notification responsibilities, terms.
- Close: consents obtained, assay agreed, hazmat shipment booked, deal logged.
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Illustrative examples based on publicly reported market data and general trade practice, not records of real ArbiTrade transactions. Figures are indicative ranges. Tariffs, sanctions, transboundary-waste rules, and documentation requirements change frequently and vary by counterparty and jurisdiction — conduct independent commercial, legal, customs, and sanctions diligence before transacting. ArbiTrade provides market intelligence and coordination only; it does not execute trades, hold funds, or act as counterparty.