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NADCA Offers Risk-Management Strategies

April 30, 2008
Hedging, other pricing tactics to help diecasters manage metal costs

The North American Die Casting Assn. has released a research report to help operations managers to implement hedging strategies and other pricing tacticts to help control metal costs.

"Effective Risk Management Strategies Reduce Commodity Volatility for Die Casters" examines various approaches to risk management, including hedging commodity costs; establishing metal costs with pricing formulas; and implementing supply contracts that identify timeframes, delivery cycles, and pricing conditions, e.g., triggers for recalculating commodity prices.

NADCA points out that metal prices are a significant production costs for diecasters, but as with all commodities these prices are influenced by numerous external factors. Among these are changes in economic conditions, capital sources, environmental regulations, and structural changes within the industries using the metal.

"The volatility of commodity markets and the tight margins prevalent in the diecasting industry make it more important than ever for die casters to understand the most effective ways to buy the metal used in their products," states NADCA president Daniel L. Twarog. "Effective risk management can be the difference between a profit and a loss for many diecasters."

For more information or to request a copy of the white paper, visit NADCA online.