Hedging

Price Risk Management – Hedging

Producers (those who sell the metal they mine and refine) are at risk of prices falling, and consumers (those who buy and make things from metal) are at risk of prices rising.

Hedging against these price movements using the futures and options contracts enables the metal industry to focus on their core business – namely, producing metal and making products out of metal.

 

Benefits of hedging

  • Fix a specific price in the future to buy or sell at
  • Fix a price range in the future within which to buy or sell at
  • Fix an agreed average price in the future to buy or sell at

Price can be the price of metal and/or a currency exchange rate thus providing…

  • Protection against price movements
  • Lock in margins and offer long-term fixed prices to customers
  • Improve budget forecasts
  • Turn inventory into cash or security for finance in margins and offer long-term fixed prices to customers
  • Protect physical inventory against price falls
  • Hedge physical purchases in times of production difficulty
  • With 25 years of metals and derivatives experience, Sanab provides superior consulting and hedging services to the metal companies.