Research On The Effect Of Hedging Strategy Of Zhuzhou Metallurgical Group

Since the 21 st century,the process of financial and economic globalization has continued to accelerate,and with the advance of the cause of reform and opening up,the market is playing an increasingly important role in economy.Market provides more opportunities for enterprises to develop,but brings a variety of challenges and risks as well.Non-ferrous metals industry are affected both by the macroeconomic environment and the relationship of market supply and demand,whose operating performance is sensitive to the change of commodity prices,raw material prices,interest rates,exchange rates and other factors.Facing various uncertainties in the economic environment,non-ferrous metal industry enterprises have carried out hedging business to avoid risk.However,scandles of speculative have occurred repeatedly,resulting in the function of hedging business has been widely questioned.Non-ferrous metal industry,especially non-ferrous metal smelting industry,whose operating performance is directly influenced by raw material prices and product price.Thus derivative financial instruments working as a means of hedging is favored by the non-ferrous metal industry.ZhuYe Group(600961)is a typical processing smelting enterprise in the non-ferrous metal industry,which has been exersing hedging since the 1990 's,and has a long history and rich experience in avoiding market risks through hedging.This paper is a case study based on its history of development(2004-2017),which combined income with the macroeconomic environment of the non-ferrous metal industry.According to a series of features,the price history of ZhuYe Group is recognised as three main periods,which is the foundation of the analysis of hedging strategy,hedging tools and hedging effect.After data calculation,it is concluded that under the influence of the changing macroeconomic environment and the supplying and demanding of the market,ZhuYe Group's hedging strategy has successfully locked the profit and reduced the volatility of the profit in a certain extent,reduced the uncertain impact of market risk,which showes that hedging does have the function of avoiding risk.The success of ZhuYe Group in hedging brings a lot of suggestions to other companies faced with the same problem: firstly,hedging needs risk control mechanism and real-time monitoring of trading to prevent hedging risks and strengthen the foresight of risk control;secondly,hedging requires clear business process guidance and operation in accordance with the requirements of the risk control.Thirdly,hedging requires the strict capacity of enforcement,the implementation of strict "preservation and no speculation" principle,and the elimination of speculative practices.Forthly,hedging needs to control risk financially,timely evaluation of futures trading,and to judge the risk if it is within the limits,through which company could achieve a degree of advance and retreat,stop loss timely.