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Exec: US volatility 'cries out' for futures, hedging tools - 31 October 2011

Futures contracts and hedging tools can be effectively used by small and midsize service centers to lessen their exposure to the pricing volatility that has defined global steel markets in recent years, Worthington Inc ceo John McConnell said.

Speaking during the Association of Steel Distributors annual conference in Las Vegas, McConnell said Worthington has employed such vehicles, mostly at customer request. As pricing cycles compress from years to months or weeks, a growing number of steel industry players have looked for help in managing risk, he said.

"When volatility got introduced… it cries out for these tools," McConnell told conference attendees, including Steel Business Briefing. "We use a number of tools – hedging is one of them, using the futures market. Hopefully, it's going to get over the hump this time."

While he said the tools make up just a "small percentage" of Worthington's business, they've helped it achieve a more "balanced” position. "It takes volatility out of our markets," McConnell said. "I think more customers are looking into it."

McConnell said his steel processing and distribution company last year predicted slow, incremental growth in a "nonlinear fashion." He sees continued softening of the market through year-end, but a seasonal pickup in January or February.

"I think it's going to incrementally improve as we go through the year," McConnell said. "Do I think it can be better than that? I don't think we can be. We can't get better than that until we get our act together politically."


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