How does trading impact business materials?  

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Over the last few years, especially following Brexit, UK construction and material costs have risen exponentially.

Many businesses are finding that their margins are being squeezed due to the cost of raw materials rising because of increased demand and limited supply. But that’s not the only thing that’s impacted the price of raw materials. Everything from stock trading to environmental issues can impact the cost of business materials.

We break down some factors below.

How do political issues impact business markets?

Businesses will have experienced first-hand that domestic and international policies can impact the prices of materials. This is normally due to the direct consequences of the policies or simply because of increased uncertainty during times of change. For example, when governments change their trade policies, the cost of raw materials can change due to the different tariffs imposed on the materials.

But it’s not just trade policy that can impact materials prices. Uncertainty can have a big – if not more significant – impact on trades. For example, fuel and oil prices jumped in 2023 when Russia invaded Ukraine.

How do diplomatic events in other countries impact businesses?

Although it’s easy to assume that only events domestically will impact your business. However diplomatic disputes in other countries can impact your business and trading. If countries have diplomatic disagreements, exports can be blocked, or high tariffs imposed.

Supply and demand: how does trading impact it?

Stock trading, particularly in commodity markets, plays a vital role in shaping the supply and demand of raw materials. The stock market serves as a platform where investors trade financial instruments representing commodities. This includes CFDs for raw materials. As with any type of trading, the impact trading can have on commodities like raw materials can be huge.

How to use CFDs to keep prices low

Traders often use CFDs to take positions on the future price movement of raw materials. One way they can keep prices low is by ‘shorting’ the materials. This means that traders profit from a decline in prices. This activity makes the market much more liquid and can put less pressure on the prices of the materials, helping to keep them low.

Final thoughts…

CFDs are key when it comes to keeping business material costs low – but that doesn’t mean it’s simple. Business materials are impacted by a wide range of social and political factors that can be hard to predict. Traders using CFDs can short materials and can help keep prices in check for businesses. While these practices can provide benefits to businesses, there are some risks to the market ecosystem. As trading becomes more advanced, regulators must have oversight of the market so that prices remain fair.