Steel pricing quandary

Steel demand comes from material-intensive industries that should rein in their costs or risk a Carillion-like demise. The more prices are volatile, the higher the need to budget them for eventual consumption.

The complexity of our supply chain and increased volatility of raw material prices for steel production make this easier said than done. Without hedging, any supplier is confronted with a hard choice between customer service and risk management:

  • Before the last economic crisis, many traders and distributors competed on customer service without much regard to market risk. When some went bust, their counterparties and banks footed the bill.
  • As the pendulum swung to better risk discipline, it came at the expense of short-termism in manufacturing and trading and inflated costs of long-term physical stockholding, which are shared by all.

Contract renegotiation has long been the only “tool” to scrape through the periods of market volatility, which is hardly a recipe for a sustainable business.

Hedging allows enhancing business relationships and risk discipline at the same time, ultimately increasing your competitiveness and enterprise value.

Responding to a market call

Collectively, we cannot go wrong by following customer needs.

We just need to get a hedging market right.

How it works


Manage costs

  • Sell at fixed prices into the future (physical);
  • Secure related costs (paper);
  • Optionally, convert paper into physical.

Manage sales

  • Buy stock at fixed prices (physical);
  • Secure related sales prices into the future (paper);
  • Optionally, convert paper into physical.

Protect margins

  • Buy and sell at spot or floating (indexed) prices (physical);
  • Secure required costs and sales prices into the future (paper);
  • Optionally, convert paper into physical.

Mitigate risk

  • Buy or sell at fixed prices under long-term supply agreements (physical);
  • Reduce the risk of price renegotiation (paper).

Please refer to Examples for more information.

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