Construction Hedging

May 14, 2021 | Francis Afonso


Managing Construction Costs

Construction projects can face various elements of risk with problems arising when exogenous shocks bring volatility to material pricing. As projects are rarely an overnight endeavor, unmanaged cost structuring may have detrimental impacts on a project as unforeseen price fluctuations in materials can greatly impact the profitability of a task. As the construction environment experiences fierce competition and low margins, cost risk awareness has become increasingly important to maintain profitability.

Hedging Introduced

A hedge is an investment that is used by commodity producers, end users and traders to protect against negative price fluctuations. Hedging is not intended to produce large profits but rather to minimize possible losses. A hedge can be implemented through the use of a financial derivative on the futures market to establish an individual’s price ceiling for a commodity.

Commonly Hedged Inputs

There's an almost limitless number of commodities that can be hedged. Our risk management team is uniquely equipped to protect against adverse price fluctuations in commodities such as steel, aluminum, copper, lumber, energy/fuel and interest rates.