Research On Copper Hedging Plan Of XG Corporation

In the past ten years,with the severe changes of the global macroeconomic,the copper price is fluctuated largely,which has brought many difficulties and challenges to the operation of copper smelting industry.At the same time,the copper futures market in China has got rapid progress,and the exchanging value of copper futures of SHFE has become the second largest one in the world.The domestic future market with the mature of system construction and active trading provides a great chance to the copper related companies to perform the risk management for avoiding the risk of fluctuation in copper prices now.As a big copper smelter in the middle reach of the copper industry chain,XG Corporation does not have the right of copper pricing and only has thin margins through copper processing.Through in-depth analysis on the operation module and the existing risks,a circular hedging solution is developed to help XG Corporation to avoid the impact of fluctuation of copper price.In order to occupy less or even to obtain liquidity,the paying period of purchased copper concentrate is normally longer than the processing period of copper concentrate.To avoid the sold copper price lower than the copper price used for copper concentrates,buying hedging in futures market can be conducted when selling each batch of produced copper.Meanwhile,XG Corporation should focus on avoiding the situation that the selling date of produced copper is close to or late than the clearing date of copper concentrate.The feasibility of the circular hedging solution and its positive effect on the risk management have been proven by simulating operation.Meanwhile,this circular hedging solution can be used in the similar copper smelting companies as well.