MSE Capability
Price Risk Management
MSE converts a physical metal position into a hedging programme on the LME and OTC markets, and administers it so the hedge stays synchronised with the physical book across the full life of the contract.
Most physical players treat hedging as a financial overlay. That is why failures arise not in theory but in operations — at the points where the financial instrument drifts away from the real book.
Where value leaks
Where the hedge drifts from the book
Basis risk
The LME leg is hedged; the regional premium — Midwest, Rotterdam duty-paid or unpaid — is not. The book reads as fully hedged and quietly bleeds on the premium.
Quotational-period mismatch
The physical contract’s QP set against a single hedge tenor. A misaligned window does not remove exposure; it creates it.
Margin and liquidity
A hedge generates variation margin. If treasury is not sized for an adverse move, the instrument protecting the deal margin breaks the cash flow.
Reconciliation drift
Shipments slip, tonnages adjust, contracts roll — and the hedge book diverges from the physical. Without reconciliation discipline, an unintended open position accumulates.
Unhedgeable pricing clause
A price term is signed in wording that cannot be cleanly hedged. The problem is created at the contract stage and surfaces at the risk stage.
How MSE works
Synchronised, not simply placed
MSE maps the exposure in full before a single instrument is placed — volume, the structure of the quotational period, the components of the premium, and currency. Instruments are then fitted to that exposure rather than to habit, and the programme is sized so that an adverse move protects the deal margin without straining treasury. From there the discipline that most desks skip: the physical and hedge books are reconciled continuously, across the whole term of the contract, so the hedge tracks the position as it actually moves.
Track record
MSE has administered hedging programmes across a $4.5B+ book representing roughly 8% of global primary aluminium flow — backed by LME operations certification and 30+ years of physical hedging.
Mandate format
How an engagement is structured
Advisory mandate
Design of the hedging programme: exposure mapping, instrument selection and the margin and reconciliation framework.
Execution mandate
Administration of the programme across the full term of the contract, including continuous reconciliation to the physical book.
Engaged as a commission agent under the Swiss Code of Obligations, Art. 425–438. Fee structure — retainer and/or success fee — agreed per mandate.
Engage MSE
Discuss a mandate
If your physical position carries price exposure, MSE will map it and build the programme that holds it.
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