Since the beginning of this year, affected by geopolitics, the new crown epidemic and other factors, the operating pressure of the chemical industry represented by polyester and methanol has increased sharply, product inventories have gradually accumulated, and the risk of depreciation has emerged. How to get rid of the situation of “domestic and external difficulties” and prevent corporate inventories from depreciating has become an urgent problem to be solved. Recently, at the themed event “Stabilizing Enterprises and Ensuring Farming and Escorting Entities—Corporate Risk Management under the Epidemic” hosted by Zhengzhou Commercial Exchange and the China Zhongshan Association, participating guests provided effective experience for upstream and downstream enterprises in the industrial chain to cope with risks and overcome difficulties together, helping Industrial enterprises achieve inventory value preservation and stabilize production operations.
The industry faces multiple challenges as the business environment changes
“Currently, both factories and traders are facing changes in the external environment.” Hong Weihuang, general manager of the Polyester Department of Xiamen International Trade Petrochemical, said at the event.
Taking the chemical fiber sector as an example, according to Zhang Lingqing, the relevant person in charge of the development department of the China Chemical Fiber Industry Association, high costs, weak demand, and logistics obstruction caused by the epidemic have gradually accumulated chemical fiber inventories to high levels, and the operating rate of the chemical fiber industry has declined. Profit margins have been further compressed, and so far some companies are already at a loss. “In the first quarter of 2022, the average profit of polyester short fiber was -130.18 yuan/ton, down 189.78% from the previous quarter. The cost has risen significantly, but the price increase of short fiber is limited amid low demand. , resulting in a significant decline in overall profits.” Zhang Lingqing said.
A reporter from Futures Daily learned that since March, the polyester industry chain and the Yangtze River Delta and Fujian regions, where the textile industry is concentrated, have been greatly affected by the epidemic. Periodic logistics difficulties have caused a greater production load in the industry chain. amplitude decreased.
Zhang Lingqing said that after the Spring Festival, some terminal finished product trading markets were closed and terminal transactions were weak. Coupled with transportation problems of raw materials and products, the operating rate of downstream chemical fiber generally declined compared with the same period last year. For example, the average operating rate of Jiangsu and Zhejiang looms in March was about 71%, a decrease of 15 percentage points from the same period last year.
“After March, polyester staple fiber companies began to reduce production due to the pressure of losses, and some companies stopped production due to rising inventories caused by concentrated production reductions by downstream companies. The current production capacity of the short fiber industry The utilization rate has dropped to 65.57%.” Zhang Lingqing said.
“From the inventory point of view, the overall inventory of polyester staple fiber is indeed gradually rising. At present, for polyester staple fiber factories, they are in the stage of shrinking processing fees. The cost of raw materials is relatively high, but the products cannot be sold at a good price. , and many companies are forced to reduce production. Reducing the load of companies will affect the scale effect and lead to an increase in unit product production costs. Under the double blow, companies are under great operating pressure.” Hong Weihuang said.
Zhang Lingqing said frankly that in the face of large fluctuations in raw materials and processing fees, companies hope to use the futures market to transfer price risks, resolve business risks and pain points, achieve stable operations, and improve core competitiveness.
Futures tools help companies lock in profits and maintain inventory value
The reporter learned at the meeting that many companies are already using futures tools to protect production and operations. The futures and derivatives markets provide companies with a variety of hedging tools and methods, such as hedging transactions and rights-inclusive trades. , “Insurance + Futures”, etc.
“Companies need to take appropriate measures according to their own situation.” Hong Weihuang said that the current market risk faced by most companies is inventory fluctuations. Some filament companies have very high inventories and low processing fees. They can choose not to sell, but the risks are gradually increasing.
According to him, in early March 2022, crude oil exceeded US$130/barrel. A certain staple fiber factory has high raw material costs, but the processing fee situation is not good. At the same time, downstream sales are sluggish, and the continuously increasing inventory makes its operating adjustment space smaller and smaller. Factories face the dual risks of lower processing fees and losses from falling inventory prices, but if they are obsessed with current processing fees, it may aggravate business risks.
“In view of this, from a risk perspective, the short fiber factory sold part of its product inventory to us in the form of PF2205+ basis to reduce inventory risks and at the same time withdraw funds. The customer sold 1,000 tons of short fiber spot in the current period, with a unit price of about 8,250 Yuan/ton. Later, after review with the manufacturer, if the goods were not sold at that time, the maximum price drop loss would reach 700 yuan/ton.” Hong Weihuang said.
It is understood that in addition to the need for inventory preservation during the epidemic, many companies also hope to lock in product profits.
For example, Hong Weihuang said that after the Spring Festival in 2021, the production profits of short fiber fluctuated significantly, and the processing fee of PF2105 plate fell from a maximum of 2,400 yuan/ton to around 1,700 yuan/ton. A short fiber factory is worried that factors such as repeated epidemics will cause losses in the future, and hopes that its partners can help it lock in processing profits for the whole year.
“Our company signed a 1,400 yuan/ton short fiber spot purchase contract with the short fiber factory, with uniform delivery every month for a period of one year. At the same time, our company passed the PTA, ethylene glycol and short fiber futures contracts, and build a virtual factory to take over the production capacity of the short fiber factory. After June 2021, the short fiber market processing fees will remain low for a long time, with a minimum of 700 yuan/ton and a maximum of 1,300 Yuan/ton, far lower than the price signed with our company��The processing fee stipulated in the processing contract. “Hong Weihuang said.
The reporter learned that the epidemic has recurred in many places in China in recent months, and methanol, which was originally in normal supply and demand, is also facing the risk of devaluation of goods brought about by the epidemic. Under this circumstance, entity companies use option tools to construct an “epidemic insurance” to avoid the risk of a sharp drop in price of the goods they hold.
“When the MA2206 contract is at 2,950 yuan/ton, we buy put options with an exercise price of 2,900 yuan/ton, and sell put options with an exercise price of 2,800 yuan/ton, both of which expire in two weeks. . The combined price is 18 yuan/ton, which is the premium. If the settlement price of MA2206 falls below 2,900 yuan/ton or above 2,800 yuan/ton at expiration, you will receive a subsidy for the difference between 2,900 yuan/ton and the expiry settlement price; If it is lower than 2,800 yuan/ton, the subsidy will be 100 yuan/ton.” Mei Zhuohang, deputy general manager of Hangshi Chemical, said that on the final expiration date of May 5, the MA2206 contract closing price was 2,754 yuan/ton, lower than 2,800 yuan / ton, the option portfolio profit is 100 yuan / ton, and after deducting the premium, a subsidy of 82 yuan / ton is obtained.
Learn from successful cases to explore new models of risk management
The stable development of the chemical industry cannot be separated from the help of futures and derivatives. The maturity and development of futures and derivatives have provided new ways for industrial enterprises to manage inventories and avoid risks.
In the 16 years since PTA futures was listed, the trading volume has steadily expanded, the price discovery function is good, and it has been deeply integrated with the development of my country’s polyester industry. The listing of PTA options has enriched industrial hedging tools, and large enterprises have achieved the dual effects of value preservation and value appreciation through option transactions. The listing of short fiber futures has improved the futures tool system of the polyester industry chain, making it easier for relevant companies to carry out combined hedging and lock in profits.
After nearly one and a half years of stable operation, the functions of short fiber futures have been effectively brought into play. In the industry, the basis spread model is gradually accepted by the market.
In Zhang Lingqing’s view, the proportion of basic price difference marketing models in the short fiber industry will further increase this year, and factories will also use the disk to lock in processing fees and other operations.
“For short fiber companies, although rising oil prices have brought about an appreciation in polyester inventory, sales difficulties have caused difficulties in repayment and cash flow growth, and the inability to maintain and realize the appreciation of inventory has become the biggest problem for the company. “Zhang Lingqing said that under this background, polyester manufacturers urgently need to use hedging tools to lock in the cost of production raw materials and preserve the value of existing inventory. From the perspective of polyester manufacturers, price management of inventory can be achieved through futures hedging.
Experts suggest that companies use a combination of PTA and ethylene glycol futures to maintain the value of finished product inventories and lock in the inventory appreciation brought about by rising oil prices. Large-scale PTA manufacturing enterprises have a large amount of PTA spot. They sell call options on or off-site to obtain royalties. If the futures price breaks through the exercise price, the large amount of spot in the hands of the enterprise can be sold to traders or downstream in the form of basis. Enterprises withdraw funds and reduce inventory pressure. This is also an operating mode and an exploration of risk management for enterprises.
It is worth noting that despite the current increasing concentration of the polyester industry, the number of small and medium-sized enterprises is still around 60%. The difficulties and pain points of small and medium-sized enterprises in production and operation are mainly concentrated in the risk of inventory price decline, price fluctuation risk and financial risk. . “Small and medium-sized enterprises can seek cooperation with professional trading companies to withdraw funds through various forms such as spot pledges. At the same time, enterprises and institutions can cooperate with institutions to enhance their ability to resist risks and ensure production profits.” Zhang Lingqing said.
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