A quick recap

Price indexes

Market price assessments researched by independent price reporting agencies provide a composite representation of decentralized commercial markets at a certain time, keeping price formation in the real economy (more info).

Actual Prices may differ from such Price Indexes because larger customers (orders) usually trade below the average market price while smaller customers (orders) usually trade above it.

What’s important for risk management is the correlation between Actual Prices and a selected Price Index, not their exact match. Over time, a 90-95% correlation between Actual Prices and Price Index (typical in SteelHedge Contracts) removes 90-95% of market risk.

There is no need to use Price Indexes in supply contracts. Your regular commercial terms may remain intact.

Basis risk

Unless Price Index is used in a supply contract, there is basis risk that the change of your hedged (actual) price may differ from the change of Price Index. The higher they correlate, the lower such risk.

A 100% positive correlation between the hedged price and Price Index eliminates both market and basis risks. This may be unnecessary for hedging: removing 90-95% of market risk (typical in SteelHedge Contracts) is better than assuming it all unabated.

To reduce basis risk, you should use in SteelHedge Contracts Price Index providing the highest correlation with forthcoming purchases or sales.

To choose the best market reference for every hedging transaction, we help you analyze historical correlations with dozens of regional Price Indexes without disclosing sensitive commercial data.

Price corridors

Price corridors allow flexibility that was previously available only through options hedging, at no extra or hidden cost. You may increase them when there is room for manoeuvre, or reduce down to zero for more precision.

Symmetric

Zero

Symmetric

Zero

Manage costs

A simple example:

A timeline example:

Scroll right for solution.

Manage sales

A simple example:

A timeline example:

Scroll right for solution.

Protect margins

A simple example:

A timeline example:

Scroll right for solution.

A picture tells a thousand words. Some say our online demo tells a million.

A picture tells a thousand words. Some say our online demo tells a million.

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