Are risk management tools new?
Such instruments have been used for thousands of years. In ancient Greece farmers sold a percentage of their olives at a predetermined up-front price, months before the harvest. Thus sharing the price risk with the buyers. In ancient Rome there was a forward market in grain. Futures contracts are issued on many products and commodity materials such as oil and gold, on currencies, indexes or equities and bonds. In the last decade in the USA alone, the futures market grew from 300 to 600 million contracts (a contract can be in multiple units for example; 25 tonnes, 5,000 litres etc). Steel risk management tools – are they new? No, but a very limited range of steel futures contracts have been available to date, both in terms of regional scope and the products covered, and trading volumes have been low. In the 1990s, a number of contracts were launched in China. In fact, three different exchanges were set up to trade steel price risk. But by 1994 all of them were closed due to lack of busi
