The Study Of Hedging For Iron And Steel Enterprises In China

The steel industry is an important basic industry of China’s economy, and is an important symbol of national level of economic development and overall national strength. Under the background of economic globalization, enterprise production and business operation activities face all kinds of uncertain factors, among them, a lot of factors will be reflected by market price volatility risk, In2012, iron and steel enterprises have changed from partial loss to the loss, this is the first time for iron and steel industry to face industry-wide losses since entering the new century. In this historical background, the iron and steel enterprises must seek safe-haven to evade market risk, ensuring enterprise continues to operate stably.This article uses hedging theory on iron and steel enterprise risk management research. In2009, Shanghai futures exchange officially launched rebar and wire rod futures contracts.The steel futures market standardization degree is more and more high, steel futures prices also more and more can reflect the trend of steel spot price, providing a guarantee for the iron and steel enterprise by hedging in futures markets.Providing price risk management mechanism is one of basic economic function of futures market, hedging is the most commonly used method in order to avoid price development towards the direction of the negative. Companies involved in hedging can solve two core issues:one is through hedging to avoid the management risk of the raw materials and product price fluctuations, implement price control; the other is through participating in hedging will make enterprise bigger and stronger, realize scale management.The article first introduces the research background and significance, the future market is the hedge of steel enterprises, hedging is an important means of iron and steel enterprise risk management;then analyse the risk of China’s steel market, analyse briefly the iron and steel industry chain the status quo, analyse mainly the present situation of steel spot market, expound the significance of steel futures to iron and steel enterprise risk management as well as China’s steel futures risk management process;and then, makes a brief introduction to the related theories, simply introduces the theory of risk management, focus on hedging related theory, including hedging concepts, principles, strategies, evaluation index; then make empirical analysis on spot steel futures hedging, using eviews analysis tool set up ECM model, logarithmic sequence of the futures price and spot price logarithmic sequence for the stationarity test, cointegration test, granger causality test, input the ECM results concluded that most hedging ratio, and calculate the hedging performance.This article also provide guidance for a steel enterprises hedging program to its production and operation. Finally, this article gives conclusions and make policy recommendations.