With respect to producers, our strategy is based on the premise that the less we can differentiate our product or service to our end-use customers, the more we push the risks of product price and volume fluctuations back to the producer. Accordingly, our contracts with producers are structured to manage commodity price and volume risk and transportation costs.

We do this in three ways.

First, we have fee-based contracts which entitle us to a fee regardless of the commodity price or volume.

Secondly, we have matched contracts, where product supply is matched to pre-arranged sales to realize a fixed margin, thereby negating price risk.

Finally, we have risk-shared arrangements under which the producers generally maintain the majority of the risk from changes in product prices and transportation costs. Chemtrade bears the remaining, or minority, portion of
the risk.

The other element in our strategy with producers is the term of the contracts. In the case of sulphuric acid and liquid SO2, (the largest volume products we handle and the largest contributors to earnings), contracts are long-term, typically for 10 years or longer.