Are you looking for some certainty for 2021? 2020 will undoubtedly go down as one of the most unprecedented years in our lifetime. Between the pandemic, lockdowns, and market swings we are all looking forward to some predictability for 2021. Our fixed pricing provides a solution to the volatility in the scrap market.
A fixed price solution is a tool to transfer price risk off your books or an insurance policy on your scrap metal revenue for a period of time. Whether it’s because your company buys steel at a fixed price, you’re looking to secure a profit margin on a specific project, or you simply expect scrap prices will fall in the coming months, having a fixed price for an extended period of time can be an ideal solution.
How does it work? Similar to an index price, however, you will no longer float with the market from month to month. The key difference is you will have a fixed price known at the start of our agreement for the defined period that you request.
Our team will follow 2 simple steps to secure a fixed price. Step 1 – is to define the agreement including the price we will pay for your scrap, contract duration, and monthly tonnage. The term of the fixed price deal can be for as short as three (3) months up to a maximum term of twelve (12) months with a minimum volume of 20 gross tons monthly. Upon agreement, Step 2 – the fixed price is committed, and your company will enter into a written contract with BL Duke. The contract will include the fixed price, monthly tonnage, duration of the arrangement, and pick-up schedule.
“We like knowing what our scrap price is going to be for the next six months,” states Patrick Steininger, President of Sko-Die. “In a market with so much volatility, we have peace of mind knowing we were able to mitigate some of the risk by securing a fixed price.”
What happens to the risk you’ve transferred to BL Duke? Our trading desk manages the risk accordingly through the scrap futures on the Chicago Mercantile Exchange (CME) and London Metals Exchange (LME). We work diligently to identify our price risk, and through the use of the scrap futures markets we can choose how much of that price risk to eliminate.
We believe the power to control price risk is best suited in our control; that we choose when and how much price risk we want to take, not that we are forced into taking the risk.
Embracing innovative opportunities in the market is key to BL Duke’s evolution and success. This is why we’ve invested in the technology, personnel and expertise needed to lock in fixed prices for our customers and to utilize futures to limit our own price risk. “The utilization of the futures market has been a key to our success in 2019 and 2020 with the volatile scrap markets that we have all experienced. Locking in the amount to be received from scrap on a fixed price production job and reducing the risk of margin compression is definitely an attractive thing to any CFO,” says Michael Garvey, CFO of BL Duke.
Our ability to provide a fixed price is another example of how we’re revolutionizing the metal recycling industry. “We understand no one knows your business better and is more incentivized to optimize strategic decisions than your company’s leaders,” says Lou Plucinski, President of BL Duke. “Empowering your team with sophisticated tools to maximize profits is part of the foundation of BL Duke’s value-added approach.”
Ready to grow your bottom line? Contact us today to secure your profit margins for 2021.