Profitable Plastics: Profit is the Thing


In general, businesses with commodity price risk (e.g. oil companies, transportation companies ... and resins processors) manage that risk to achieve different objectives - cost certainty, budget or forecast targets, job and business security, competitive advantage, customer loyalty, etc. IMHO, the primary purpose of managing commodity price risk should be to secure and improve profit margins. Profits keep the doors open and people employed. Resins processing may be tons of fun, but profit is the thing.

For processors, managing profit margins means controlling (hedging!) resins costs consistent with the way revenues are generated: the timing and type of resin cost hedges should reflect the timing and nature of product sales. In simplest terms, what you do with one side of the operation should take into account what's happening on the other side. (Think oil refinery and crude oil costs. Hedging crude oil costs independent of gasoline pricing isn't hedging. It's betting.)
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