| Iron&Steel companies have faced worsening business conditions in recent years.In one side,imported iron ore fines are controlled in foreign hands.In the other side,the market competition of downstream product,environment and energy constraints are getting stronger.The volatility of Iron ore price exacerbates profit uncertainty of steel enterprises.In October 2013,Dalian Commodity Exchange launched futures contract of iron ore,offering risk management tools for iron ore spot for domestic steel companies.This article analyses the situation and the factors of imported iron ore fines in Qian’an Iron&Steel corporation in order to solve the problem of volatility of the iron ore prices.The hedging theory and the requirements of hedging system are introduced later.The hedging strategies of buying and selling are proposed and basis trading strategy based on the analysis of price variance makes up for the general hedging strategy defects.The assessment criteria of hedge effectiveness are fit for state-owned steel enterprises who will participate in hedging. |
