What is Mark-to-Market (M2M)

While I’m not an accountant (and I’m sure the CPAs in this group will have insights to add), this will be a high-level overview—plus how your daily actions impact M2M.

𝗛𝗼𝘄 𝗠𝗮𝗿𝗸-𝘁𝗼-𝗠𝗮𝗿𝗸𝗲𝘁 𝗪𝗼𝗿𝗸𝘀
When companies use M2M accounting, they can book profits at the inception of a deal rather than waiting until liquidation.

🔹 𝗘𝘅𝗮𝗺𝗽𝗹𝗲:
A company buys 10,000MT of refined aluminum at a premium of $300/mt, with expected costs of $50/mt. At the time of purchase, the market sales premium is $400/mt.

📊 Initial profit calculation:

Market Sales premium: $400/mt
Total costs: $350/mt ($300 purchase + $50 costs)
✅ Profit at purchase: $50/mt or $500,000 total
Even though the company hasn’t taken delivery or booked a sale contract, it can use the 𝗯𝗲𝗻𝗰𝗵𝗺𝗮𝗿𝗸 𝘀𝗮𝗹𝗲 𝗽𝗿𝗲𝗺𝗶𝘂𝗺 to recognize this profit immediately.

𝗪𝗵𝗮𝘁 𝗛𝗮𝗽𝗽𝗲𝗻𝘀 𝗪𝗵𝗲𝗻 𝗣𝗿𝗲𝗺𝗶𝘂𝗺𝘀 𝗖𝗵𝗮𝗻𝗴𝗲?
If the benchmark sale premium rises by $50/mt, M2M increases by $500,000.
If the benchmark sale premium drops by $50/mt, M2M decreases by $500,000.
M2M continuously captures changes in:
✅ Premiums
✅ Logistics costs
✅ Finance & credit costs
✅ Hedging gains/losses

This real-time P&L tracking allows companies to:
📌 Spot errors faster
📌 Improve financing discussions
📌 Gain better oversight of long-term deals

𝘍𝘰𝘳 𝘢𝘯 𝘦𝘹𝘢𝘮𝘱𝘭𝘦 𝘰𝘧 𝘩𝘰𝘸 𝘕𝘖𝘛 𝘵𝘰 𝘮𝘢𝘯𝘢𝘨𝘦 𝘔2𝘔, 𝘸𝘦 𝘩𝘪𝘨𝘩𝘭𝘺 𝘳𝘦𝘤𝘰𝘮𝘮𝘦𝘯𝘥 𝘸𝘢𝘵𝘤𝘩𝘪𝘯𝘨 '𝘌𝘯𝘳𝘰𝘯: 𝘛𝘩𝘦 𝘚𝘮𝘢𝘳𝘵𝘦𝘴𝘵 𝘎𝘶𝘺𝘴 𝘪𝘯 𝘵𝘩𝘦 𝘙𝘰𝘰𝘮'. 𝘈 𝘱𝘳𝘰𝘱𝘦𝘳𝘭𝘺 𝘮𝘢𝘯𝘢𝘨𝘦𝘥 𝘔2𝘔 𝘴𝘺𝘴𝘵𝘦𝘮, 𝘩𝘰𝘸𝘦𝘷𝘦𝘳, 𝘱𝘳𝘰𝘷𝘪𝘥𝘦𝘴 𝘢 𝘮𝘶𝘤𝘩 𝘤𝘭𝘦𝘢𝘳𝘦𝘳 𝘱𝘪𝘤𝘵𝘶𝘳𝘦 𝘰𝘧 𝘱𝘳𝘰𝘧𝘪𝘵𝘢𝘣𝘪𝘭𝘪𝘵𝘺.

𝗪𝗵𝘆 𝗠𝗶𝗱𝗱𝗹𝗲 & 𝗕𝗮𝗰𝗸-𝗢𝗳𝗳𝗶𝗰𝗲 𝗧𝗲𝗮𝗺𝘀 𝗠𝗮𝘁𝘁𝗲𝗿
Your actions directly impact M2M—and ultimately, the company’s profitability.

⚠️ 𝗦𝗼𝗺𝗲 𝗸𝗲𝘆 𝗮𝗿𝗲𝗮𝘀 𝘁𝗼 𝘄𝗮𝘁𝗰𝗵:

🔹Changing contract allocations can affect spreads and profits.
🔹Over, under, or missed hedges immediately impact P&L when corrected.
🔹Financing a trade longer than expected? M2M will capture all added costs daily.
🔹 Logistics costs should be updated as soon as changes are known.

📌 Staying aware of market conditions and keeping contracts updated in real time will set you apart as an employee.