6: Price Risk Management

One of my more surreal experiences as an economic consultant involved addressing a group of executives from Reynolds Metals in the early-1980s. At the time, Reynolds was an integrated aluminium producer and my assignment was to discuss the state of the industry. This was shortly after the London Metal Exchange (LME) had begun trading aluminium, so I spent a great deal of time explaining why the LME had initiated this contract and why I thought it would have a profound and beneficial impact on the way the industry would do business in the future. I was rather proud of the homework I had done and the insights I had obtained. I believed the presentation was original and was hopeful that it would be thought-provoking to the audience.