Hedging 101:
What is HRC (Hot Rolled Coil) hedging?
Hedging is the practice of utilizing a financial forward market, in this case HRC Futures, to reduce price risk in physical steel.
Our History with Hedging:
Since executing our first single lot (20 ton) trade in 2021 Barsteels hedging activities have evolved. Today, more than 25% of our order book utilizes our hedging services as part of their overall purchasing strategy. The majority of our customers that utilize hedging are repeat hedging customers. Once an OEM experiences the benefit firsthand, they typically incorporate it into their purchasing strategy.
Hot Rolled Steel Futures Hedging is not the ONLY answer. It is ONE strategy to employ where it makes sense for your supply chain. Contact us to learn more about steel hedging risk management services
What you should expect when partnering with Barsteel to hedge your steel supply…
- Access: Access to Barsteels internal trading infrastructure.
- Information: You tell us how involved you want to be in the hedging process. We can update you with prices daily, even intraday, in an easy and accessible format.
- Transparency: 100% transparency into transaction price and control over prices at which we execute trades.
- Optionality: Most OEM’s either buy on the spot market or contractually on an index deal. Hedging in the forward market is another tool in the toolbox to ensure long term success.
Case Study
In July 2023, Customer X was interested in locking in price on 300 tons for December 2023 and January 2024 rolling. They had a price set with their end customer and did not want price risk hanging over their heads.
In July we accessed the futures market and secured December and January rollings at $769/ton ($38.45/cwt) and $812/ton ($40.60/cwt), respectively, for an average price of $790/ton ($39.50/cwt).
Had the customer stuck with their original plan to buy in the spot market, their price would have been $987/ton ($49.35/cwt) and left them with low or no margin.
The net benefit to the customer was twofold.
1 – They saved $59,000 on 300 tons by utilitzing the futures vs spot price.
2 – In July 2023, they already had full transparency into their steel cost for end 2023/early 2024, locking in their profit and eliminating price risk.
Industries Served
Barsteel flat rolled products are used in a diverse range of markets, including:
Agriculture
Barsteel's high-strength steel products are excellent for manufacturers of agricultural products, including heavy equipment, gates, tanks, irrigation equipment, and feeders.
Learn MoreAutomotive & Transportation
From automotive components like bumpers and suspension to rail cars, manufacturers within the transportation sector use Barsteel flat-rolled steel products for superior results.
Learn MoreConstruction
Barsteel has supplied high-quality steel solutions for the construction industry, supporting a wide range of projects from garage doors and carports to concrete forms and catwalks.
Learn MoreHeavy Equipment
Heavy construction and mining equipment manufacturers utilize flat-rolled steel for housing and components on loaders, tractors, mixers, excavators, pavers, heavy-duty trucks, and other large equipment.
Learn MorePipe & Tube
Our steel sheet and coil are excellent for pipes, tubing, and fittings, including conduit, decorative pipes, and structural supports.
Learn MoreMetal Fabrication
Metal fabricators use our hot-rolled, hot-rolled pickled and oiled, cold-rolled, and coated steel products for vending machines, tanks, toolboxes, trailers, and more.
Learn MoreSolar
Energy infrastructure manufacturers use our steel products for everything from conduit to power poles.
Learn MoreContact Our Experts
Give us a call or fill out the form and one of our team members will be in touch as soon as possible.
*marks required fields