Would you be interested in locking in your scrap price for anywhere from one to twelve months in the future? If so, B.L. Duke can now offer you a fixed price with customizable terms. No more waiting month to month to find out what you are going to get for your material.
We can offer these fixed prices through the utilization of scrap futures to hedge the risk. A hedge is an investment that reduces the risk of adverse price movements to a specific asset. In this case, that asset is your scrap metal. Whether you have a project on the horizon where you will be producing an abnormal amount of scrap or you produce a steady amount of scrap per month, we can help reduce scrap market risk by selling futures contracts for the months you expect to sell us the material.
How does it work? We enter into a written agreement whereas you agree to sell B.L. Duke a committed number of tons per month for an agreed upon period and B.L. Duke agrees to pay a fixed dollar amount for that period, regardless of market conditions. Think of this as an insurance policy on your scrap metal revenue for the agreed upon period. This will allow you to forecast your scrap revenue over a given period without the worry of markets going down. The fixed price would be established on the day that you committed to it as we will be utilizing futures markets to allow us to provide this fixed price to you. In order to make it worthwhile for both parties, we suggest that the tonnage covered by this agreement be a minimum of 1,000 tons over the period of the contract.
“Hedging scrap market risk by utilizing scrap futures is an innovative way that can help mitigate exposure to the scrap market in 2019,” says Lou Plucinski, President of B.L. Duke. At the November 2018 Fastmarkets AMM Conference in Rosemont, ferrous scrap futures were a key topic along with freight rates, the zorba market and the automotive outlook for 2019. According to an article posted on the AMM website, Five things we learned in Chicago, the Section 232 tariffs have heightened volatility and uncertainty in 2018, which have increased the need for better price risk management tools.
Contact your B.L. Duke buyer today to set up a time to discuss your recycling program and how we can lock in a scrap price free from fluctuations. Follow B.L. Duke on Twitter, Facebook and Instagram for news and market updates in the steel and scrap metals industry.