The use of futures tools is an effective supplement to the spot business strategy. Through years of practice, companies in the methanol industry chain have explored a variety of methods and strategies for combining futures and cash. With the support of methanol futures, companies can formulate corresponding solutions in accordance with their individual needs in daily production and operation.
The reporter learned from the investigation that in recent years, methanol prices have been operating at a low level, and insufficient storage capacity is an unavoidable problem for manufacturers. Due to the mentality of "buy the ups and not the downs", downstream companies often wait and see, and the market is prevalent in an inventory-free operation model. Downstream companies use as much as they need, which will result in insufficient upstream storage capacity and insufficient utilization of surplus storage resources downstream.
In the first quarter of 2019, methanol prices continued to fall, downstream companies reduced their purchases, while upstream manufacturers were under high inventory pressure, and factories were in urgent need of inventory. In order to promote downstream procurement of goods and reduce inventory pressure, Xinneng (Tianjin) negotiated with a downstream company in Hebei to deliver the goods to the downstream idle warehouse, pay the downstream company an appropriate storage fee, and allow the downstream company to use the goods first; Signed an agreement with the downstream, and the future settlement will be in the form of "point price". While signing agreements with downstream companies, Xinneng (Tianjin) will carry out selling hedging in the futures market and open up 8,000 tons of arbitrage positions. After deducting the cost of intermediate links, Xinneng (Tianjin) sold to downstream companies at a point price and achieved profitability. Downstream companies also reduced procurement costs through corresponding operations and achieved a win-win situation.
According to market participants, Xinneng (Tianjin) has increased the overall utilization of storage resources in the market by forwarding the goods to the downstream storage areas in advance, and reduced the risk of parking due to insufficient storage capacity. Appropriate storage fees have also subsidized downstream companies. ; On the other hand, it has strengthened the viscosity of downstream enterprises and laid a good foundation for Xinneng (Tianjin) to expand the market.
Combined now to help companies solve logistics problems
During the outbreak of the new crown pneumonia epidemic in China, due to limited transportation and difficult sales of goods, all methanol plants in the northwest were facing storage problems. They had to reduce the burden or stop to avoid safety accidents, and the reduction or parking would generate tens of millions. the cost of. Many methanol companies have chosen to use futures tools to solve this problem.
The person in charge of Xinneng (Tianjin) said: "Methanol futures will be of great help to factories during the epidemic. When most factories drop their burdens, we can drop a little less; when sales channels are not smooth, we can sell more goods. ; When the market is down, we can sell at a higher price."
Xinneng (Tianjin) actively used methanol futures after the holiday, arranging inventory in two channels to reduce losses. One is to sell more than 10,000 tons of the factory's existing inventory to downstream customers in the northern periphery at a point price, allowing customers to use the goods before settlement. Second, considering that the epidemic may continue to spread, Xinneng (Tianjin) sold all of its February output of more than 40,000 tons to the futures market and organized the delivery of goods to the delivery warehouse. In February, Xinneng (Tianjin) sold more than 50,000 tons of goods through the futures market and basically achieved zero inventory. The sales price was more than 10% higher than that of neighboring factories, and the operating load was about 5 percentage points higher than that of neighboring factories.
Fujian Changyuan Energy Co., Ltd. is one of the largest methanol traders in Fujian, with an annual trade volume of 400,000 to 500,000 tons. The company imported 20,000 tons of methanol a year ago. In order to avoid price drops during the Spring Festival, the company sold 20,000 tons of hedging in the futures market. Affected by the epidemic, the spot price fell sharply at the end of the festival. Because the company carried out a sell hedging, there was basically no loss in this decline.
"The downstream operating rate after the holiday is low, and the spot is very difficult to sell. Fortunately, there is a methanol futures market, otherwise the company may not be able to operate normally." The relevant person in charge of Fujian Changyuan Energy Co., Ltd. said with emotion.
In the period of normalization of epidemic prevention and control, many industries, including methanol, will still face more uncertainties. This puts forward more refined requirements for the operation and management of related enterprises. How to better use the period and current to reduce risks has become a problem for many companies. Things to think about.
"Under the current market background, the combination of futures and cash is a general trend, and companies should walk on'two legs.'" said Ye Weile, an analyst at Guotai Junan Futures. The upgrade of business models and business ideas for methanol industry companies is an inevitable choice to adapt to the development of new business formats. As a place for risk exchange, the market can not only find prices, but also hedge risks, and achieve effects such as invigorating inventory.
Methanol futures have been listed for many years. At present, whether it is a production company, a trading company or a downstream company, through the use of futures tools, corporate risk management awareness and capabilities have been greatly improved. For example, when shipments are not smooth and inventories are high, methanol producers can choose to sell hedging on futures to reduce the risk of inventory depreciation; methanol trading companies can use sell hedging to lock in the cost of cargo, or use basis trading and point trading. Speed up the shipment speed and shorten the sales cycle. At the same time, attention should be paid to studying and judging the trend of basis and discovering its operating rules, so as to enhance the flexibility of strategic operations.
Source: Chemical Network
