HRC Futures: The role a hedge plays

Last week in Chicago, we hosted several metals companies for our bi-annual Metals Price Management Seminar (“MPMS”). During the class, we heard feedback we believe is important to address here, as our readers continue to install and implement their respective hedge programs.

During our two-day education session, there was some discussion around the role a hedge plays in the related physical transaction. It’s important to remember that a hedge is a separate, but related, financial transaction. This transaction represents an expected physical transaction that will occur at some future date. An important note: a company’s hedge position does NOT have to alter the regular operations between its suppliers or its customers.