Steel Hedging

May 03, 2021 | Francis Afonso


Steel Hedging

The fluctuating price of steel can have a significant impact on a company's bottom line which is why many companies hedge their steel purchases. In an increasingly competitive marketplace, being able to accurately forecast and or manage steel costs can give a company an advantage over their competitors.


Steel prices are volatile with physical trades being frequently conducted on an index-linked basis. It is possible to manage price risk exposure with U.S. Midwest Domestic Hot-Rolled Coil Steel.


Why hedge using the futures market:


• The global steel market is one of the largest commodity markets in terms of value after crude oil


• These contracts allow price to be managed separately from physical supply


• Steel contracts are listed for the current year and the next two calendar years enabling the establishment of a forward price curve


Steel hedging can reduce your company’s exposure to volatile and potentially rising prices by stabilizing input expenses.


By developing and implementing a sound steel hedging program, you will not only be able to reduce your risk, you will also be able to accurately forecast your future steel purchases and may even provide your company with a competitive advantage.


If you decide to develop and implement a hedging program, steel costs will no longer be on the list of things that keep you awake at night.