We believe it is one thing to be a consultant and advise clients what to do; it is another thing to have real skin in the game alongside clients like we do.
We believe the metals market has fundamentally changed.
The dramatic increase in Hot Rolled Coil (HRC) prices during 2020-2021 suggests that the market has entered a new era in pricing. (A similar step change occurred in 2004.) The price of HRC on July 28th, 2021 was assessed at $1,830, a 10.28 standard deviation step change from the average price during 2004-2020. A move this significant had only a 1:1,248,000 chance of happening. But we don’t believe it is an abnormality.
We built Flack Global Metals (FGM) by embedding the forward curve in every aspect of our business. So we have been living hedging – not just talking about it – for more than a decade, successfully managing our own portfolio’s risk for over ten years, no matter the market. Throughout that decade, we invested in the infrastructure to support our own hedging as well as our customers’ activities. That infrastructure is the foundation for Flack Metal Bank (FMB).
- FGM was a party to the first options trade on the CME for HRC in late 2012.
- 25% of all hedges placed on the CME for HRC futures are currently coming from FMB
- We have generated a +1,000% return on capital since 2017 using HRC futures in both up AND down cycles in our own investments.
- FMB will have two seats on the CME to continue educating and supporting buyers.
We invested in the FMB Risk Management and Research Team, the most sophisticated risk desk in the ferrous space in North America, to assist our customers with all aspects of hedging from strategy development through execution. Our five-person, highly-experienced team provides HRC futures and options market making, client strategy development and price modeling, clearing and margin maintenance, market research, and econometric modeling. More importantly, the FMB team works with our customers to match risk strategies to actual business needs so the results are actionable, not just theoretical.
We are able to handle most situations in-house and with little involvement required from our customers, making it easy to fit hedging with FMB into existing business practices. And yet our team excels at educating buyers on hedging strategies and processes, mainly because we are executing the same for our own inventory at FGM.