PHYSICAL SOLUTIONS

EMBEDDING DERIVATIVE TRANSACTIONS IN PHYSICAL

Mine & Metal* was facing problems with their business model. An admirable and relentless commitment to inventory turns did not allow them to provide long-term pricing to their customers using physical hedges. Further, an internal policy against the use of financial derivatives prevented Mine & Metal* from commercial activities of any deviation from market prices.

OUR APPROACH

We collaborated with Mine & Metal* to craft agreements to secure physical goods with pricing properties that allow them to compete with others that do not have the same business model or internal policy constraints. They were able to structure long-term fixed price deals with customers, backed by incoming fixed price goods into the future. Further, when opportunities to do so arose, they were able to secure floating price physical goods agreements at large discounts to market pricing into the future.

RESULTS

The physical agreements enabled by Metal Edge Partners allowed Mine & Metal to retain their comparative advantage in their market without compromising on their ideals or business model, nor did they need to trade any derivatives internally. They were able to retain, or in some cases expand their market share given new pricing solutions with which they were able to go to market, and capitalize on opportunities from which they were excluded beforehand.

*We take our client’s confidentiality seriously. Referrals are available on request.