Reuters reported that Boeing Company may decide within the next year to begin hedging aluminum prices on the London Metals Exchange in order to reduce volatility in its costs.
Mr John Byrne an executive with the company's commercial airplanes unit said that if initiated, the company intends to use the new hedging program on its long term agreements.
Mr Byrne said that given the volatility, it's hard to tie down firm fixed pricing so we have been looking at what are the different options to bring a little bit more stability into that pricing component hedging the LME was one of the options we have been studying. Within the next year was probably a reasonable time frame that we might use that option.
Boeing's consideration of hedging was triggered by a sharp rally in the benchmark LME aluminum contract this year. Just last month, the metal surged to USD 2,803 per tonne it’s priciest since August 2008.
Mr Byrne said that the company preferred to maintain its long term agreements with its suppliers, but when necessary could venture into the spot market. You always have emergent demand come up and 95 plus percent of the time we can meet those through our existing agreements but there will be unique situations where we will need to go to the spot market.
He said that what we are trying to do is get that option configured so should it be something we would want to do we have it available to us. He estimated that his division will secure about 150,000,000 lbs of flat rolled aluminum products in 2012.
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