What does Commodities stand for?

In the energy industry, commodities are the natural sources or energy carriers that are used to generate energy. These include crude oil, natural gas, coal and uranium. They are used as fuels in power plants to generate electricity or heat. Electricity is also a commodity and is traded both on exchanges and bilaterally.
As a result of the energy transition, dependence on traditional commodities such as raw materials or fuels is decreasing. Although electricity generated from renewable energy sources such as wind turbines or photovoltaic systems is also considered a commodity, its production and the systems and modules required for it are not. Storage systems and (digital) solutions for improving energy distribution are also examples of non-commodity-based products.

The importance of commodities extends throughout the economy and into our homes. Price fluctuations influence the cost of electricity, heating and fuel. Companies are dependent on commodities that influence production costs and operational stability. For consumers, price fluctuations affect the cost of living. Both companies and private consumers benefit from the responsible use of energy by reducing their energy costs and at the same time helping to reduce environmental pollution.

Commodities are physical goods that are produced and consumed on a large scale. Energy products such as electricity or heat are more specific and are measured by the energy generated from the raw materials. These products are either sold directly to end consumers or supplied to companies that use them in their production processes. 

Commodities can be traded both physically, i.e. by actually buying and selling the commodities, and via derivatives. Derivatives are financial instruments whose value is derived from the price of an underlying asset, in this case commodities. In the electricity market, these include financial products that do not involve delivery, such as futures or options.

Which exchanges trade commodities?

The most important international exchanges for global commodities trading include the Chicago Mercantile Exchange (CME), the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE).

Where are electricity and other commodities traded in Europe?

In addition to energy products, the European Energy Exchange (EEX) also trades certain commodities such as gas, emission allowances, coal futures and some agricultural commodities. Compared to the major marketplaces, however, the EEX concentrates on its core business and plays more of a central European role in commodities trading.

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