Service centers are going to have to step up their use of financial instruments to compete in an increasingly risk-averse steel market, said several panelists Tuesday at Platts’ Steel Markets North America conference in Chicago.
“We as an industry are very fearful of the futures market,” said Flack Steel CEO Jeremy Flack, who uses hedging in his own business. “We’re the last major business in the world to do without these things.”
Steel Market Intelligence managing partner Michelle Applebaum said that financial instruments will likely become more accepted over time as they become more reliable and the steel industry learns to trust them. “We will, I think, get more exchange traded steel futures,” she said. “We’re just kind of in the Wild West, pioneer days right now.”
Metals consultant Sandy Simon said controlling price risk is going to be one of the most important factors in future service center success.“Everybody in the OEM market wants price stability,” he said. “What risk level does your buyer want?”