Currency Escalation & Material Escalation

loveshield

New Member
Chinese
Hello All,
In the two sentences below, why would currency escalation and material esclation occur when exchange rate and commodity rate move down by - 5%? Shouldn't both of them decline too?

1.Currency Escalation shall occur if exchange rate (USD to RMB) moves by +/- 5% from the base rate .
2.Material Escalation shall occur if commodity rates move by +/- 5% from rates.

Thanks !
 
  • Thomas Tompion

    Senior Member
    English - England
    It's hard to be sure what this means without more context, but I think these may be clauses in a contract, protecting both the producer and the purchaser against currency changes and/or changes in the prices of materials.

    I suspect that if the movement in the currencies or the material prices is more than 5% either way, the final-product price can be altered. This gives both parties a certain degree of insurance that the price of the product will be as quoted.

    I suspect that escalation here just means raising or lowering of price, and that material escalation therefore implies material price escalation.

    You may be thinking that escalation implies increase; I'm pretty confident that here it can mean movement in either direction.

    Don't forget my initial caveat.
     

    loveshield

    New Member
    Chinese
    Hi Tomas,
    I'm pleased to see your prompt help. And your analysis really helps me out.
    Yes,you are right.These two sentences come from an collabration agreement,which I'm trying to put into Chinese.
    I did think escalation meant increase,and this meaning doesn't make sense in the sentences. And your view clears all this out.
    Thanks again.
     
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