Project Risk Management On Iron Ore Raw Material Procurement Project Of A Company

Under the global economic crisis background, Chinese steel mills production capacity has exceeded demand resulting in aggravated trade competition, it is necessary for a steel mill to reduce the cost and improve the economic results. Because the material cost occupied a very big proportion in overall expenditures so this article will research how to reduce risks in material purchasing project.There are many uncertain events, especially material price fluctuation during the material purchasing process. Using project risk management theory and method, this article has researched all risks involving the iron ore price fluctuation caused by the change of the iron ore price mechanism, sea borne price variation, degradation of iron ore quality, inventory cost, cargo loss risk on voyage, delayed cargo etc, and has made risk identification and assessment and has provided risk response strategy accordingly.The article has particularly studied the possibility of avoiding material procurement risk by using financial derivatives.Conclusions:Following the market movement and strengthen the risk prediction.Strengthening the accuracy of procurement plan, Implementing integrated management pattern relating to production, procurement and sales dept to respond the risk positively.Improving the proportion of Australian/Brazil ore may shorten the time of ocean shipping in order to reduce stock en route.It is possible to avoid the risk of price fluctuation by making good use of financial derivatives tools.