Hot Rolled Futures: The Long and Short of It

SMU contributor Bryan Tice is a partner at Metal Edge Partners, a firm engaged in risk management and strategic advisory. In this role, he and the firm design and execute risk management strategies for clients along with providing process and analytical support. Prior to Metal Edge Partners, Bryan held a variety of commercial leadership roles involving purchasing, sales and risk management for Feralloy Corporation, Cargill Steel Service Centers and Plateplus Inc. You can learn more about Metal Edge @ www.metaledgepartners.com. Bryan can be reached at Bryan@metaledgepartners.com for queries/comments/questions.

Steelmaking and steel processing has always been an exacting business. Customer specifications can be rigid and industry tolerances have often lagged what the market demands. For those who sell processed slit coil or cut-to-length sheets, you well know that there are specific tolerances that need to be met. Too narrow and your customer cannot make the part, too wide and there will be excessive scrap that your customer will either be unable to process or at the very least seek recompense. When it comes to cut-to-length sheets, if it is cut too short your customer runs out of steel while burning on their laser table, whereas if it is cut too long and outside your customer’s tolerance, the sheet will no longer fit inside the laser bed and result in a rejection. Trading steel derivatives is no different in that there are consequences in being too short or too long.