Combining plastics market risk with the current period

In the current market environment, the uncertainties in the price changes of plastic raw materials are increasing, and the traditional trade model is facing challenges. At the 2010 Plastics Industry Investment Opportunities Summit Forum held in Shanghai last week, delegates believed that under the background of the difficulty in spot sales and the increasing risk of a purely trade model, plastics that have been operating steadily and have become increasingly functional have become manufacturers and traders. One of the effective measures to improve trade patterns and avoid market risks.

Increased risk of traditional trade model

Since 2010, China's plastics prices have experienced another sharp drop since the 2008 financial crisis, with a drop of nearly 30%. At the same time, the plastic **'s positions have reached record highs, reaching a record high of 226,000 hands, and the differences between the long and short sides have intensified. With the start of Zhenhai Refining and Chemicals, the annual production capacity of polyethylene in China will exceed 10 million tons, and the scale of domestic inventories will rise rapidly. Plastics production, trade and consumer companies will face enormous risk of price fluctuations.

“Because spot sales are getting more and more difficult, the risks of pure trade are increasing day by day. At the same time, the competition for pricing power by financial capital has caused traditional traders to be confused in the face of price, and the traditional trade model of “low buy and sell high” has been broken and arbitrage, Trade under arbitrage and protection is becoming more and more necessary.” Zhu Mingyuan, head of industrial development at Xiangyu, pointed out the current dilemma facing plastics companies.

It is understood that China has become one of the largest plastics producers in the world, and industrial clusters have been optimized year by year. The overall advantages have been gradually improved, and national brands with independent intellectual property rights have increased. The annual consumption of synthetic resin in China exceeds 65 million tons, which is one of the major markets for the production and consumption of plastic products in the world. Since 2003, the dramatic ups and downs in China's plastics market have brought enormous production and operating difficulties to related production and trading companies. According to Liu Huajun, deputy general manager of the Dalian Commodity Exchange, “In recent years, affected by the sharp fluctuations in global crude oil and domestic coal prices, China’s plastics production, trade, and consumer companies are facing huge risks, and it is urgent for the market to use price discovery and avoidance. The function of insurance provides a suitable financial tool for the stable operation of the company."

The period is now combined with the effectiveness of hedging

Under the situation where traditional trade methods have been increasingly challenged, DCE launched linear low-density polyethylene and polyvinyl chloride in 2007 and 2009 respectively. Liu Huajun said: "Since the listing of LLDPE and PVC **, it has been operating steadily, and related spot companies and investors have participated in the activity, and they have played a good role in price discovery and hedging. Two types of ** spot prices Correlations above 0.8, with good convergence, effectively reflect the spot market price trends, and can provide a reasonable reference for production and consumption.”

According to Liu Huajun, plastics** attracted a large number of companies to participate in risk aversion. As of July 2010, more than 2,600 spot companies have participated in plastics** safe-haven transactions and achieved good results. With the development of the market, the structure of plastics** market participants has been constantly optimized, with corporate customers accounting for about 20% of the transaction volume, and the end of month positions have basically stabilized at around 50%. In 2009, the trading volume and trading volume of plastics accounted for 126 million hands and 5.74 trillion yuan respectively, accounting for 15.05% and 15.24% of the total trading volume and trading volume for the year. From January to July this year, a total of 53.17 million lots and 2.77 trillion yuan were traded by the plastics companies of the Dashang Group. According to 2009 data from the American Association of Industry and Commerce, DCE has become the world's largest plastics market.

According to Yu Tao of Yuanda Plastic Products Division, ** has significant positive effects on the expansion of Broad Plastics' business, which is mainly reflected in the aspects of risk control, flexible sales, inventory management, pricing methods, investment arbitrage, and decision-making basis. Since 2008, ** has helped companies effectively resist the impact of the financial crisis, enhanced risk control capabilities and stable profitability in the context of rapid expansion of business scale, and annual business scale has increased by 40% to 50%.

Yu Haitao told reporters: “Using ** tools can not only better meet the needs of end customers, but also maintain good suppliers' channels.” The import business of plastics usually has a period of 1 to 2 months. During this period, there is a price gap for some goods. Mouth, must risk hedging through ** operation. For example, when there is a downside price risk, you can sell **, which objectively reduces inventory. Later, if the spot is difficult to sell, the registered warehouse receipts are delivered; if the spot can be sold, both the end customer and the profit or loss are maintained. In another case, when the end customer has an advance purchase request, he can buy it at **, and after the replenishment in the spot market, he can close the long position. Through this operation, the company has increased its share of the terminal market, and can obtain stable profits.

The differentiation of traders has clearly developed

With the smooth flow of logistics and market information, the global plastic trading structure is gradually changing. Zhu Mingyuan stated that in the current situation, whether it is a production enterprise or a trading enterprise, the traditional trade model will be difficult to survive, and relying on the ** market, trade under “arbitrage” and “hedging” will become more and more necessary. .

Zhu Mingyuan also stated that with the changes in the trade structure and the increasingly transparent market, the positioning of traders is also changing. Scale, logistics, and services are bound to become the core competitiveness of future trading companies. Global large-scale trade companies such as Cargill, Glencore, and Dutch Toke do not pursue the profit of each ton of goods. Instead, they value the efficiency of logistics and distribution, as well as the scarcity of cargo resources. He predicted that in the future, domestic traders will be divided into two groups. Large-scale traders will increasingly pursue scale, logistics, and integration effects, start their own logistics companies, build warehouse bases, and reach tentatively into the upstream and downstream industries; Small traders will seek more differentiated positioning, special materials, and services.