Enterprises Should Rationally Operate PVC Hedging Business to Strictly Control Risks

Due to the impact of snow weather and the speculation of speculative funds, the price of PVC has recently increased. The growth rate has reached 50-100 yuan/ton per day since New Year's Day. After experiencing the previous rise, PVC spot futures prices have begun to fall again as the weather gradually improves.
In response to fluctuations in the price of PVC and the expansion of the company’s own production scale, companies involved in hedging have added additional hedge funds. Zhongtai Chemical recently announced that it intends to increase the amount of hedging business guarantee from the current 20 million yuan to 50 million yuan. Ying Li Te, general manager of Jianli, said in an interview: “The size of the company's current hedge is relatively small and cannot completely achieve the goal of hedging, so the company plans to gradually expand the scale of hedging in 2010.”
PVC futures were formally listed on the Daishang Group on May 25, 2009. The listing of PVC futures provides tools for hedging of related manufacturers. Chlor-alkali Chemical grabbed the first order for selling PVC futures on the first day of listing. In a delivery in September last year, Xinjiang Tianye became the “largest seller”.
As the medium and long-term price movements of PVC show a clear periodicity, short-term prices fluctuate drastically. Both of these characteristics provide companies with opportunities for hedging in PVC futures.
Ying Lite is the general manager of Jianxin said that the company will produce 23,000 tons of PVC monthly and 25% will be used for hedging business. The size of hedge protection is relatively small and can not fully achieve the purpose of hedging. Therefore, the company plans to gradually increase the amount of hedging in 2010. However, since the company is a central state-owned enterprise, the amount of funds and the amount of hedging must undergo a strict examination and approval system. After approval, we Will expand the hedging scale.
There are many factors that affect the price of PVC, such as demand pull, capital speculation, policy changes and cost changes and other factors, so the spot price tends to fluctuate significantly. Under such circumstances, it is more difficult to determine the price trend of the product, and the difficulty of the hedging of the production company through the futures market will increase, and how the enterprises participating in the hedging control will be the key.
According to the disclosure of the British Elite three quarterly report, during the reporting period, the company launched a net income of RMB 2.22 million for the PVC hedge protection business. So, how does Intimete control risk in hedging? Ying Li Te is the general manager of Jianxin who has answered the experience of controlling risks in detail.
It is generally stated that the risk of futures hedging business mainly comes from two aspects: one is capital risk, and the other is transaction operation and delivery risk. The company strictly follows the level-by-level examination and approval system in terms of funds. The special person is responsible for allocating funds, supervising and checking the use of funds, and controlling the positions so as to avoid the risk that the funds cannot be promptly put into place by forced liquidation.
The specific method of operation is: Under the premise of fully analyzing the market, with the idea of ​​complete hedging, the futures entry point for futures is carefully selected. When there is a large basis difference between the futures price and the spot price, the selling period hedging business is adopted for the stock spot, and the expected profit is locked. In order to prevent the large-scale floating losses in the futures market, the positions are gradually set up in batches. If there is a futures plunge during the hedging period, if the open position income is greater than the settlement return, the profit will be closed and the position will be closed. If there is no opportunity to close the position, the delivery will be due and the purpose of hedging will be achieved.
For example, in August of last year, due to inflation expectations and capital speculation, V0911 contract, futures prices are much higher than the spot price. Through a comprehensive analysis of PVC costs and market supply and demand relationships, he hedges inventory stocks at that time to develop a hedging scheme. The detailed plan for the number of hedging units, the selling period price, and the expected profit will be executed after the approval of the meeting. According to the situation of the futures market, the futures traders will gradually establish positions above the selling price of the scheme, and report the positions, the selling period price, the float loss and the fund occupation on a daily basis. During the period, it only sells or does not buy. When the liquidation income is greater than the delivery income, the position is closed, otherwise it is due for delivery. When the futures are due for delivery, due to reasons such as transportation and quality inspection being unqualified, delivery products cannot be delivered on time, which will result in the risk of forced liquidation. In this regard, after the sale of the futures contract, the goods are successively transported to the company's off-site warehouse near the delivery warehouse, and are transferred to the delivery warehouse during the delivery period. In order to ensure the quality of the delivered goods, the quantity of goods shipped to the off-site warehouse is greater than the period of sale. The number of hedges to ensure that the number of failed inspections by inspection agencies can be replaced on time.
Zhongtai Chemical also stated that the company's hedging transactions are limited to PVC futures contracts that are listed on the Dashang Trading Co., Ltd., and are not engaged in any kind of futures trading or related derivatives transactions at any other place. The amount of hedging is based on the actual spot production quantity, and at the highest, it does not exceed 30% of the actual production quantity of the company.
Analysts said that in the case of stable raw material prices, manufacturers generally hedge their earnings by selling hedging, so hedging is only a stabilizer of performance and will not bring excess profits to the company. At the same time, there is also a risk of hedging. If the futures price changes in an adverse direction in the short-term, if there is not enough margin, it may be forced to take a short position. At present, PVC futures are difficult to bear rationally for spot price discovery. Enterprise hedging must be based on its own production capacity and trade volume to determine the size of the participating units.

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