A Steel Company Hedging Plan Research

Since2013, global steel serious overcapacity problem is outstanding. The domestic iron and steel enterprises is regulated by the international situation and domestic strict property, enter a state of industry-wide losses. The iron and steel enterprises are facing high costs, high inventory and realistic problems such as low profit or even negative profit. And, in the steel raw material procurement, iron ore is the largest proportion of the cost of steel. China’s iron ore external dependence is high around60%, but China as the world’s largest consumer of iron ore, no independent pricing power, highlight the issues that led to the steel smelting cost is high. On the other hand, steel demand is abate, iron and steel enterprises split the cost of high load production lead to high inventory. In the weak demand, prices down all the way, under the condition of raw material inventory, especially major cost of iron ore, steel price from huge loss, iron and steel enterprises in2014, facing unprecedented pressure to survive. This paper introduces the research topic of iron and steel industry background, is A steel enterprises how to make use of existing steel derivatives hedging problem of raw material inventory, price fluctuations, puts forward the suggestion and scheme.In order to explore the steel industry derivatives of A steel enhance the competitiveness in the market role, this paper summarizes the basis for a successful case of steel columns A futures hedging has been carried out on the steel now actively exploring iron ore futures hedging and steel futures hedging deal with raw materials, steel stocks depreciate the role of risk, which made the use of financial derivatives to reduce or even avoid the inventory devaluation losses,locking corporate profits and enhance a steel in such a harsh competitive market environment, and through simulation hedging benefits for impact assessment. This will help improve the existing A steel business ideas, in the "new normal" market environment to survive and develop.