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South Korea’s top steel producer POSCO has curbed production due to an ongoing trucker strike, according to Bloomberg. On Sunday, the company told Bloomberg that as of 7AM local time Monday daily cold-rolled coil (CRC) steel production will be curbed by 4,500 mt, as the trucker strike has exhausted the company’s warehouse space. The trucker strike, which entered its seventh day yesterday, appears at a stalemate as talks over the weekend between the union and government officials failed to make progress, according to Bloomberg. POSCO produced 13.645 million mt of CRC in 2021, of which 7.6 million mt was exported, according to steelmint.com. |
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As the US is a large importer of CRC, taking South Korean volumes out of circulation could impact our domestic and import prices of CRC. American consumers of CRC steel can use CME HRC Steel swaps and options as a proxy hedge for their physical usage. CRC consumers might consider applying simple hedges involving call options to protect from an increase in prices. One other possible strategy is a costless collar, meaning a consumer would buy a call and simultaneously sell an out-of-the-money put option, thereby creating “zero cost.” This gives the consumer upside protection from a price increase above the strike price of the call option. Such positions are standard for consumer hedging, but they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. Please also contact us for further details regarding our correlation analysis of CRC and HRC. (6/14/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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AEGIS Insights |
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06/8/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 05/23/2022: India's Steel Exports Tariffs Shock Producers 05/11/2022: China's Metals Exports are on the Rise |
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| Important Headlines | ||
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6/13/2022: Copper’s outlook under threat as economic risks pile up 6/12/2022: Top Steelmaker in South Korea Halts Production on Trucker Strike 6/12/2022: POSCO to halt some plants as South Korea trucker strike continues
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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