4 ms·

Regarding the prices of steel rising 50% can't this be mitigated to some extent by buying core materials (or a proportion of) on the futures market which is spe

• chris_va 11y ago
  Yep. That and currency hedging should be part of any large corporation/project.
• mikeyouse 11y ago
  This is another project management failure -- it costs money to hedge a position, but if the EPCM firms wanted to, they could have literally guaranteed raw materials costs for the entire duration of the project. This is probably where the industry will end up, with full hedging to prevent big overruns, but there are two problems; 1. The general public is uninformed, half-educated, and outraged easily. 2. Money in the beginning stages of a project is relatively expensive compared to the remainder of the project. When the bid was selected, the project wouldn't be completed for another ~10 years -- Buying steel / concrete hedges and currency futures to guarantee prices would tie up tens of millions (maybe more) for ten years with interest before the bridge was operational. If the prices of steel and concrete and returned to their historical norms, the public would likely be blaming the firm for wasting all that money on worthless financial engineering. Could you imagine the protests if it came to light that the bridge consortium paid Goldman Sachs something like 10%-15% of the cost of the bridge with nothing in return?