Hedging made easy

SteelHedge is a B2B, peer-to-peer hedging platform for the whole range of steel products and steelmaking raw materials.

Through technology and partnerships with leading providers of market data and post-trade services, we offer the steel value chain a better way to reduce market risk WITHOUT financial intermediation. The platform is exempted from financial regulation by FINMA, the Swiss financial regulator, because it doesn’t engage in financial market activities.

We are neutral, independent and committed to industrious steel communities worldwide.

Our role

SteelHedge develops the technology, legal environment and stakeholder relationships required for a vibrant and safe market for peer-to-peer (direct) hedging of prices of steel products and steelmaking raw materials.

We represent the interests of all steel market participants across global and regional supply chains and do not engage in other activities.

The platform does not act as a market maker or a counterparty in any hedging transaction.

Where we come from

As steel industry insiders, we believe that traditional hedging techniques do not respond to the needs of steel industry participants.

A combination of several factors perpetuates a vicious cycle of low demand and poor market liquidity:

i

Standardization

Traditionally, hedgers relied on financial intermediaries to develop derivative contracts and markets.

The diversity of steel products and regional idiosyncrasies hinder development of exchange-traded futures and OTC swaps with sufficient customization and liquidity for price risk management.

Way forward

A decentralized market driven by hedgers and enabled by flexible paper contracts.

Traditionally, hedgers relied on financial intermediaries to develop derivative contracts and markets.

The diversity of steel products and regional idiosyncrasies hinder development of exchange-traded futures and OTC swaps with sufficient customization and liquidity for price risk management.

Way forward

A decentralized market driven by hedgers and enabled by flexible paper contracts.

Inconvenience

The complexity of managing financial derivatives, coupled with growing regulation of financial markets, cripple demand from steel market participants.

The “one-size-fits-all” clearing of financial derivatives doesn’t take into account very different risk profiles exhibited by hedgers and speculators.

Way forward

Simple paper contracts that easily integrate with supply agreements.

Flexible post-trade processing based on hedgers’ preferences and risk profiles.

The complexity of managing financial derivatives, coupled with growing regulation of financial markets, cripple demand from steel market participants.

The “one-size-fits-all” clearing of financial derivatives doesn’t take into account very different risk profiles exhibited by hedgers and speculators.

Way forward

Simple paper contracts that easily integrate with supply agreements.

Flexible post-trade processing based on hedgers’ preferences and risk profiles.

Financialization

Commodity derivatives are used for hedging and speculation. A fundamental conflict of interest is that hedgers need less market volatility while speculators want more of it.

The last two decades have seen an unprecedented surge of speculation in commodity futures, which overtook hedging transactions by a wide margin.

The more speculators participate in a given futures market, the more they influence forward price curves, which may have spillover effects on physical markets.

Way forward

A marketplace restricted to commercial hedgers and insulated from the influence of financial markets.

Commodity derivatives are used for hedging and speculation. A fundamental conflict of interest is that hedgers need less market volatility while speculators want more of it.

The last two decades have seen an unprecedented surge of speculation in commodity futures, which overtook hedging transactions by a wide margin.

The more speculators participate in a given futures market, the more they influence forward price curves, which may have spillover effects on physical markets.

Way forward

A marketplace restricted to commercial hedgers and insulated from the influence of financial markets.

Where we go

SteelHedge tackles these problems at their roots, realigning price risk management with the needs of the real economy.

To streamline hedging, reduce price volatility and ensure a liquid market, the platform is restricted to commercial hedgers, powered by network effects and enabled by innovative modular paper contracts grounded in physical markets:

  • Instead of forward price curves, SteelHedge contracts are based on market data licensed by leading price reporting agencies;
  • When required, settlements are secured through escrow, insurance and clearing services provided by first-tier financial institutions;
  • Trading is facilitated by customized algorithms and corporate insights from established risk and compliance data providers.

This ecosystem makes price risk management easier, safer and better aligned with hedgers’ operational requirements.

Markets change

You may drive change instead of being driven by it

Markets change

You may drive change instead of being driven by it

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