Research On Hedging Strategy Application Of Copper Processing Enterprises In China

In recent years, with the integration of the global economy, the price of commodity which affected by the international market is much more obvious in China. Chinese enterprises are facing increasing price risk, so using futures to avoid risk is becoming more and more urgent. Copper is a kind of global industrial materials. It’s consumption is growing year by year in China. Copper’s output and imports quantity is restricted by a lot of objective conditions. The contradiction of copper’s market demand and supply is very serious, so that the price volatility is very frequent. The price risk of Chinese copper processing enterprises which are in the middle of the whole industry becomes more serious. Using hedging to avoid the management risk is very important for Chinese copper processing enterprises.With the development of Chinese futures market, more and more copper processing enterprises use hedging. But the hedging of copper processing enterprises is still in primary stage, which has some problems, such as lacking understanding of futures market, means of investment,trading strategies and experience, and ignoring the change of basis. Using the traditional hedging strategy is unable to achieve good effect because of the copper price volatility become more and more intense, so that a lot of copper processing enterprise are in trouble. From perspective of copper’s hedging research, we get some results in terms of hedging method and validity, however, there’re several problems:Firstly, the research of copper processing enterprises’ hedging strategy is less. The existing research on the practical aspects of hedging strategies in industry or business in our country is still lacking and useless. Secondly, the effectiveness of the different hedging strategy in enterprises research is not enough. The purpose of this study is to find a suitable hedging strategy for copper processors, and provide a reference method which help them to improve hedge effectiveness.The research idea of this article is based on the lessons which learned from the hedging of our corporate. Firstly, the article analyzes the status of copper processing enterprises’ strategies, and find out the way to solve problems. Secondly, by analyzing and comparing the existing different hedging strategies, the development situation of our markets and corporate, the article find the most suitable hedging strategy for copper processing enterprises, then select a typical enterprise to design different hedging strategies according to the actual business, compare the different hedging strategies in the same situation and observe the effect of different hedging strategies. At last the article gets the following conclusions:Comparing with the traditional hedging strategy, the hedging strategies which are based on the profit-seeking type hedging theory are more suitable for copper processing enterprise in our country. Using arbitrage hedging strategies and expected hedging strategy reasonably can improve the effectiveness of hedging for copper processing enterprise. Hedging mechanism, management system and operation process in our country are still need to be improved.