Price deck

Every valuation of a producer is a commodity price forecast wearing a spreadsheet. The price deck is that forecast written down explicitly: the price assumed for each year of the model, by commodity and by grade where it matters.

The usual construction has two parts. For the years where futures trade with real liquidity, the forward curve is the natural reference because it is observable, tradeable and the basis on which hedging and financing decisions are actually made. Beyond that the curve thins or stops, so a long run assumption takes over, and the defensible anchor for it is the industry's marginal cost of supply, the price needed to bring on enough new production to meet demand. Prices persistently below it curtail supply, and prices persistently above it attract it.

The single most common error is carrying a near term price into the long run. A spot price lifted by a supply disruption or a geopolitical premium is the commodity equivalent of a peak margin, and extending it into the tail of a model is the same mistake as capitalising peak earnings.

Because the answer moves so much with this input, the deck is a place to show your work rather than bury it. Sensitivity to the long run price usually swamps sensitivity to the discount rate, and saying so unprompted is a stronger signal than presenting one number with false precision.