Bitumen hedging

What is bitumen hedging?

As a bitumen consumer or producer, in addition to the operational process, one of the key challenges to plan and budget ahead is the volatile bitumen prices.

At Global Risk Management we can assist you in securing your budget on bitumen by offering fixed financial prices for bitumen ahead. By separating the financial price and physical delivery you will obtain maximum flexibility and price security.

Bitumen hedging is not about making extra money, it’s about avoiding losing money and making sure your budget is kept.

Bitumen hedging from a consumer's point of view

If your company is exposed to bitumen price fluctuations, bitumen hedging is a tool that can help eliminate the risk of your fuel budget getting out of control. Here is a few examples of why to hedge:

You enter (buy) a fixed price with Global and can continue to buy at your current suppliers. Global is not involved in any physical delivery.

  • If the price of bitumen has increased since you entered a fixed price; Global will send you a financial compensation to offset the increase in your physical bitumen price.
  • If the price of bitumen has decreased since you entered a fixed price; you will send a financial compensation to Global but at the same time benefit from your lower physical bitumen purchase.

By the end of the day you will have obtained the fixed price and are now in control of your bitumen budgets.

What if my project is delayed?

In construction the practical world rarely behave as budgeted. Environmental issues, strikes, legal changes during a PPP-project or a long winter like in 2012/2013, can throw all the best planned projects off its feet and reshuffle physical bitumen consumption. At Global we have the necessary expertise to allow you to reshuffle the financial bitumen fixed price to fit you actual consumption. If the project is delayed 2 months – we simply help you move the fixed price 2 months. If weather conditions allow you to speed the project – we will help you bring forward the fixed price.

What quantity should I lock in with Global?

The short answer is: ….it depends.

If you have won a PPP project and know you approximate bitumen use during the project lifetime, it depends…
… if the bitumen use on the concrete (no pun intended) project is not a major part of a particular years use, then budget hedging is likely the best course of action.
… if it is a major part, then we generally recommend to secure close to or 100%.

We are ready to assist you in finding the best tailor made solution. Feel free to contact us for a discussion on your fixed price opportunities in bitumen – no strings attached.

Step 1: Identifying goals

Our simple, yet flexible 3-step process kick starts your fuel risk strategy and keeps it fine-tuned to the market.

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