What is Flack Capital Markets (FCM)?

FCM is a division of Flack Global Metals, backed by FGM’s balance sheet, responsible for all derivative trading activities at FGM. FCM manages FGM’s market price risk, speculative positioning and market making in HRC and other ferrous products. FCM also handles Structured Transactions, allowing others within the industry easy entry into risk management:

  • Core – FGM originates the physical supply
  • Directed Buy (DBST) – Customer originates physical supply

Directed Buy Structured Transactions allow customers to convert a floating price arrangement into a fixed price arrangement (or vice versa) separate and distinct from their physical supply agreements.

How does it work?

Customers negotiate supply contracts with their desired producers and supply chains. The customer then sets up a “Directed Buy” with FCM, allowing it to assume responsibility under the negotiated supply contract. FCM works with the customer to convert the pricing within the supply contract to the customer’s desired pricing structure. FCM manages the hedge placement, passage of information, and any “A La Carte” services. As material is produced, FCM will purchase and pay the supplier while simultaneously invoicing the customer at their agreed upon pricing structure.

What are the costs involved?

Cost are structured as a fee for service and are determined on a case-by-case basis. Ultimately, FCM costs amount to the cost of a grade extra, which is insignificant relative to the long term costs of buying on floating index contracts, fixing prices only once a year, and most importantly, riding the volatility of the domestic steel market.

Why should I use FCM vs using a bank or doing it myself?

FCM is where the physical meets the financial. It is the most sophisticated ferrous risk management group in North America, built along side and in conjunction with FGM’s physical distribution business.

  • Banks will help you swap pricing, but won’t touch the physical. FGM manages the challenges of the physical supply chain on a daily basis, and FCM has incorporated those solutions into its products.
  • FCM allows you to leverage its long-standing, best-in-class risk management group to seamlessly manage price risk. When using FCM, customers don’t need to worry about, or pay for, traders, brokers, clearinghouses, ISDAs, hedge accounting or risk management systems.
Why is it important that FCM operates as an asset management group and market maker?

FCM’s success as an asset management group proves its expertise in ferrous markets, and allows customers to leverage FCM’s research and analysis to make the best possible decisions for their business. By becoming a member of the CME and purchasing two seats on the exchange, FCM provides liquidity in ferrous markets, allowing customers to receive the best possible price over the long term.

What if the market falls? How do I cancel?

The customer is always able to exit their FCM pricing structure should they wish to revert back to their original pricing structure. DBSTs offer several choices for handling the reconciliation of any gains/losses.  

What if I want to transition from fixed to floating and back to fixed again?

Directed Buy Structured Transactions (DBSTs) are designed to allow maximum flexibility for the customer. At the customer’s direction, FCM can convert into or out of any pricing structure, allowing the customer to adapt to changes in their business, capitalize on expected price movements or take advantage of opportunities on the curve.

Can you do a multi-year contract?

Yes – multi-year contracts are encouraged. FCM products allow for separating physical supply from pricing. Securing long-term supply agreements, while continuously and systematically managing price risk, creates the most certainty over time.