Volatility in the Raw Materials Market and Risk Mitigation Methods

Abstract

Companies in the raw materials market operate in a volatile and unstable market. Business downturns exert a particular effect
on the level of cash flows and generate insolvency risk among companies, all the more so when crises are driven by objective circumstances
beyond human control. Being well-versed with these risks, a company should take steps to mitigate the risk of raw
materials price volatility affecting the planned results in at least the medium term. The subject of this analysis is to point out the
interdependencies between the basic economic categories when it comes to how the steel market functions and the risks stemming
from the volatility of the raw materials market. Moreover, it portrays the main financial instruments that can be used to mitigate
the consequences of the risk of movement of raw materials prices.