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AMM's Guide to Steel FuturesPhysical Price and Futures
Steel futures in combination with physical indexed price agreements allow mills to have forward price timing flexibility.
SBM Viewpoint
The forward selling price portfolio of a mill can be adjusted over time by adding or reducing steel futures positions. Physical contracts remain price indexed while a price risk management team decides the appropriate forward portfolio position based on current events in the market, internal budgets and input costs.
Spot price patterns have become more erratic and are less predictable in recent years regarding the timing of when to negotiate favorable steel contracts. Decoupling the timing of forward price commitments from physical steel contract negotiation deadlines provides the steel mill with more timing flexibility on when to commit to forward price positions.
