Members of the global metal community can use hedging to manage their price risk on the London Metal Exchange (LME), an expert told participants of a workshop in Bahrain yesterday (November 25).

According to LME's senior business development executive Robert Fig, hedging offers protection against price movements, long-term fixed price sales and margin lock-in, improved budget forecasts of costs and profits and the option to turn inventory into cash or security for finance, said a report in the Gulf Daily News (GDN), our sister publication.

The workshop delivered by Fig was the first activity of the Arab International Aluminium Conference (Arabal 2014) which will be officially inaugurated today.

"Using the LME also offers market participants the opportunity to access a transparent reference price for use in physical trade negotiations.

The exchange provides additional services to customers to gain a competitive edge and offers protection for physical inventory against a fall in price, he said.

"Participants can also swap physical material on a location and brand basis and access the exchange's delivery mechanism as a source of material in times of extreme shortage, and as a channel to sell in times of surplus."

He said hedging against investment risk means strategically using instruments in the market to offset the risk of any adverse price movements.

"Investors hedge one investment by making another," he added. - TradeArabia News Service