Aluminium Trade Behavior And Its Hedging Strategy Research In China

China is one of the largest countries on producing and consuming electrolytic aluminum all over the world. However, there is an oversupply in the current Spot Markets due to domestic capacity expansion and monetary policy control. Besides, the hedge transaction in the domestic aluminum market is not as active and mature as the western market. With the global trend of strengthening of the financial attribute of goods futures markets and the financial liquidity, the factors contributed to the fluctuation in price of the aluminum market is more uncontrollable. As a result, there is a huge price risk in the domestic aluminum market, and hedge transaction is urgently needed to avoid and minimize the price risks. Aluminum trading enterprises have extensive influences and focal position in the whole industry chain. Therefore, this paper conducts a research on hedge transaction in aluminum market.This paper, carried out in the context of the current situation in Spot Market and Future Market, is based on the OLS model, B-VAR model, and ECM model. The author collected the data of aluminum market from January 2rd,2008 to March 15th, 2011, consisting of 778 future prices and spot prices, and then conducted an empirical study in the aspect of Risk Min and Utility MAX. In addition, the author conducted a case study of one aluminum trading enterprise to do the further analysis. The findings proved that, firstly, there is significant co-integration relationship between spot price and future price on aluminum in Shanghai Futures Exchange. Secondly, hedge transaction can be applied to the aluminum spot market. Lastly, it’s of great importance and necessity to apply a hedge transaction in aluminum trading enterprises.The innovation point of the thesis is:the author used the method of comparative analysis to reveal the similarity and differentiation between LME and SHFE in the process of empirical study and case study.