Research On Commodity Futures Hedging Of Non-ferrous Metal Enterprises

As one of the important pillars of China’s real economy,the non-ferrous metal industry has an irreplaceable role in promoting the continuous advancement of our economy.Global economic integration has given China’s non-ferrous metal companies more opportunities to participate in the international market,but it has also exposed them to more risks,especially the sharp fluctuations in the prices of raw materials and finished products,which pose a greater threat to their production and operations.Therefore,risk management of metal prices has become the primary task of China’s non-ferrous metals companies.Commodity futures have the function of finding prices and transferring risks,and it is a wise choice to use this tool for risk management.Enterprises can effectively solve the problem of price risk through futures hedging,thereby stabilizing production and operation and improving competitiveness.However,at the same time,commodity futures are high-risk instruments,which can easily cause risk events if they are not used properly.Therefore,it is necessary to study how to correctly manage risk through futures hedging.After summarizing domestic and foreign literature on hedging,this paper focuses on the status of hedging in the non-ferrous metal industry,and selects two representative companies,Yunnan Copper and Yunnan Aluminium,to conduct case studies and analyze in depth the commodity futures hedging of the two companies,including hedging policies,organizational structure and hedging-related strategies.Through research,it has been found that Yunnan Copper’s hedging strategy is more mature and flexible,and the hedging scale is more suitable for production and operation needs;while Yunnan Aluminum’s hedging strategy is relatively cautious and conservative.Subsequently,a comparative analysis of corporate financial performance and corporate value is conducted to evaluate the effect of hedging between the two companies.Through research,it is found that hedging can stabilize the profit fluctuations of the two companies,but Yunnan Copper’s profit fluctuations are smoother and its profitability and corporate value performance are more outstanding.Its hedging is more successful,and due to the conservative nature of Yunnan Aluminum,the effect of hedging on the business performance of the company is relatively weak.Through case studies,this article puts forward the following suggestions for hedging in China’s non-ferrous metals companies and other entities: First,companies should pay attention to hedging,and they should also actively participate in the derivatives market while treating them carefully;second,companies should formulate strict hedging system and establishing a reasonable organizational structure to strengthen the risk management and supervision of hedging;Third,under the premise of ensuring the capital flow of the enterprise,the scientific and flexible use of futures makes the hedging scale compatible with the production and operation needs of the enterprise match.Only in this way,futures can better play its hedging function,reasonably avoid production and operation risks,stabilize the volatility of corporate profitability,and bring a positive impact on corporate value and enhance corporate competitiveness.