Study On The Private Steel Enterprise's Strategy Of Iron Ore Purchase Risk

Since the 1990s,construction, machinery, light industry and automotive industries grew rapidly, which stimulated steel demand effectively.China steel output reached the world first. Along with the growth of steel industry, the private steel enterprises develop rapidly. By 2010, there were more than 1,200 steel enterprises and private steel enterprises accounted for over 700. Iron ore is the important materials in iron and steel production, accounting for about 30% of the cost, iron ore procurement costs directly affect the enterprise economic benefits if sales prices in steel products under the condition of invariable. Our dependence on foreign iron ore up to 60% or more.International iron ore prices fall because of the global financial crisis in 2008,leading to the enterprises which purchased high prices of iron ore business heavy losses. The loss of private steel enterprises reached 70%.The fluctuation of iron ore price brings great risks to the private steel enterprises. So risk management is an important guarantee for iron ore private steel enterprises' sustainable development. This paper will focus on the procurement of iron ore, macro and micro factors of risk, looking for purchase risk strategy.The first part of the paper introduces the background, purpose,meaning and the research methods. The second part reviews relevant theory, as the theoretical basis for this study. The third part from the qualitative Angle analysis macroeconomic factors of political, economic and sea freight, crude oil prices, market prices of copper and lead and other relevant changes in raw material prices; micro factors of domestic supply of iron ore, iron ore Imports, domestic demand for iron ore and iron ore supply and demand balance. Using multiple regression model discuss the influence degree of the main influence factors on iron ore purchase risk. The fourth part using GARCH-VaR model the fluctuation measures the risk of procurement. The fifth part gives some advices to A steel enterprise:first, establishing purchasing alliance with other enterprises; second, using backward integration strategy; third, applying hedging strategy. The sixth part analyzes A iron & steel enterprise risk management process applying to the successful experience. The 7th part is the full text summary.This innovations of paper are applying multiple linear regression analysis affecting iron ore of correlation purchase risk factor, and using GARCH-VaR model steel enterprise risk measurement. In addition, I propose qushi hedging theory to improve safety and efficiency of funds, enhance their market competitiveness.