Research On Risk Control Of HL Steel Corp’s Futures Hedging Business

In recent years, with the sharp fluctuations in steel and iron ore prices,price risks that steel companies facing has truly presented in front of us. The relevant industries and enterprises has played a positive role in the avoidance of price volatility risks by using the c copper, aluminum and other non-ferrous metals futures trading correctly, and also had a good demonstration effect. Under this circumstances, HL Steel Corp has begun to carry out the futures hedging operations to avoid the price risks of raw materials and finished products in 2012.Though Futures hedging can avoid risks that come with price changes,as a kind of derivative financial instruments to avoid risks, it has certain risks and once applied inappropriately will bring huge risks and losses.This article is precisely under such background, in the analysis of existing research, trying to help HL Steel Corp find effective risk control measures on futures hedging operations and achieve the goal of locking cost and ensuring the profit successfully.This paper uses the theory and method of futures hedging, hedging accounting, risk management and internal control to study the problems in HL Steel Corp’s risk control of futures transaction, and helps them find a scientific way to deal with it.First of all, this paper probes into some relevant theories of financial derivatives hedging and focus on the method of using risk value theory to study rebar futures prices and risk measurement. Then, this paper briefly introduces the current situations of HL Steel Corp’s futures hedging and analyzes risk factors during the hedging transaction process.Considering the situation the deficiencies exposed in the futures hedging business operations and company internal control system of HL Steel Corp, this paper points out that the problem of the company according to risk management and internal control theory. Finally,on the basis of fully understanding the problems, this paper points out that the cruces in HL Steel Corp’s implementation of risk control and puts forward the countermeasures of risk control of steel futures hedging business, including establishing a hedging business risk prevention system, perfecting the internal control system, strengthening the risk identification and assessment, setting up a professional trading team and setting reasonable goals on the basis of scientific analysis of the transaction the price risks.According to the analysis of this article,the problems exposed in futures hedging business management of HL Steel Corp has the certain representation and the control measures put forward to solve these problems also has a certain significance. Other Iron and steel production enterprises can draw on the experiences and lessons from them.