RFQ vs Offer: What's the Difference in Commodity Trading?

A Request for Quotation (RFQ) is initiated by the buyer. It specifies what the buyer wants to purchase — commodity type, quantity, quality specifications, delivery location, and desired timeline — and invites suppliers to submit their best price and terms. RFQs are the standard method when a buyer has specific requirements and wants competitive pricing from multiple suppliers.

In commodity trading, RFQs typically specify the Incoterm (FOB, CIF, etc.), preferred payment terms, and any quality certifications required. A well-structured RFQ attracts better responses because suppliers can accurately price their offer. Vague or incomplete RFQs result in wide price ranges and conditional quotes.

An offer (also called a firm offer or indication) is initiated by the seller. It specifies what the seller has available — commodity, quantity, quality, location, price, and validity period. Offers can be 'firm' (binding if accepted within the validity period) or 'indicative' (non-binding, subject to further negotiation). In commodity markets, offers are common when a seller has inventory or production they need to place.

Firm offers typically have short validity periods (24-72 hours) because commodity prices move constantly. An indicative offer is more like a starting point for negotiation. Sellers often send indicative offers to gauge market interest before committing to firm terms.

Buyers should use RFQs when they have specific quantity and quality requirements and want to compare multiple suppliers. This is especially useful for large purchases, new supplier relationships, or when price transparency is important. RFQs work well on commodity trading platforms where multiple sellers can respond competitively.

Sellers should publish offers when they have ready inventory, production coming online, or a specific cargo to sell. Offers work well for standard commodities where the product specs are well-known (e.g., LME-grade copper cathode, ICE No. 11 raw sugar). In practice, most commodity deals involve a combination — an RFQ might generate offers, which then lead to negotiation on final terms.

For RFQs: be specific about quantity, quality specs, delivery location, and timeline. Include your preferred Incoterm and payment terms. Set a clear response deadline. For offers: state the price basis clearly (e.g., 'CIF Rotterdam, payment by LC at sight'), include the validity period, and specify any conditions or exclusions.

On platforms like CommodityTradeX, both RFQs and offers are structured to ensure all critical information is captured, reducing back-and-forth communication and enabling faster deal closure. Digital platforms also allow counterparties to verify each other's credentials before engaging.