Bringing Visibility to Long-Term Cement Agreements
Long-term cement contracts lack transparency. Here’s how index-linked tools and price overlays bring visibility to multi-year deals.
7 Mar 2025
Bringing Visibility to Long-Term Cement Agreements
Long-term supply agreements bring commercial stability, but not always price clarity.
When contracts span 12, 24, or even 36 months, small pricing misalignments can compound into large risks. And too often, the pricing model stays static, even when the market doesn’t.
Here’s how to bring visibility to longer-term deals, and improve performance across the board.
The Problem: Locked-In but Unclear
Multi-year cement contracts often rely on a fixed price, or a vague escalation clause.
This gives the appearance of stability, but creates blind spots:
What if the market drops?
What if freight rates or fuel costs swing wildly?
What if inflation erodes the margin?
Without visibility, it’s hard to respond.
The Fix: Index + Overlay
One solution is to link long-term pricing to a trusted benchmark, like Platts FOB Turkey, with a negotiated adjustment to reflect your location and contract type.
This is called an index-linked contract.
From there, you can add a swap agreement to fix your price exposure without changing the supply terms.
It gives both sides the ability to plan, and the flexibility to adjust.
Why This Matters
Buyers gain a clearer view of forward costs
Sellers can model revenue and production with confidence
Both sides reduce friction in contract renegotiations
It’s not just about managing volatility, it’s about enabling better decisions.
Real-World Example
A UK buyer enters a 24-month contract with a Turkish supplier.
They index the price to Platts FOB Turkey + $18.
To protect against future surges, the buyer also enters a swap fixing the benchmark at $65/mt for the first 12 months.
The result? They maintain supply security, but remove price risk.
Make the Contract Work for You
Long-term agreements don’t need to be rigid.
By using smart pricing tools, you can gain structure and flexibility, and avoid surprises later.
If your contract runs more than 6 months, it may be time to add visibility.