Arbitrage represents the raison d’être of commodity trading. Traders try to generate profits by exploiting price differentials, be in geographical, product, or temporal form.
Geographical arbitrage represents a situation when one product can be sourced cheaper from a different location even when taking into account transportation costs.
Product arbitrage represents a situation where the trader optimizes or substitutes the product sold for a more economical (yet contract-and-purpose compliant) solution.
Time arbitrage represents a situation where a trader profits from a commodity that has different pricing at different delivery times (immediate vs deferred delivery), taking into account storage and financing costs.