Research On Risk Management Of Iron And Steel Enterprise Based On Hedging

Steel is the largest metal materials in the world. Its price changes affect not only the profits of associated enterprises, but also a country’s stability and development in economic. Due to the turmoil of the international financial situation, the prices of steel and other commodity markets have sharp fluctuations. The price fluctuations bring great risk to the enterprises in the steel industry chain. Hedging is one of tool which transfers the risk of price fluctuation. With the building of steel futures, Chinese steel enterprises have more comprehensive hedging tool. As the largest steel producer and consumer, It is an important problem of Chinese steel enterprises that how to effectively use hedging to hedge price risks in commodity markets,This paper studies the hedging strategy of steel companies. On the basis of risk management and hedging theory, I summarize its present situation and problems by utilizing the normative research and the case study method. I analyze the basic situation of S Steel, production processes and the relative futures. Also I summarize the hedging situation and analyze the problems. At last, based on the S Steel production processes, related futures and the hedging problems, I design the scheme including target, management system, organization design and the sales of hedging activities. In this scheme we can manage the market risk through the futures market which encountered in the production process and management in S Steel Company.This paper demonstrates the feasibility of S Steel risk management through hedging. Effective hedging activity should have clear objectives, scientific organizational structure, management system and feasible hedging program. The new hedging strategy will become the mainstream of futures market hedging.