Increased Demand For Risk Management During Capacity Release Period Futures Help Polyester Enterprises To Operate Stably

Increased demand for risk management during the commissioning period of ethylene glycol production capacity

On July 15, the "new Jiangsu online forum week of futures market service" qiangfu Meigao "- ethylene glycol Industry Risk Management Forum (Suzhou station), sponsored by Jiangsu securities regulatory bureau and Taishang Institute and undertaken by Chuangyuan futures, was successfully held. At present, the ethylene glycol industry is in the production capacity release cycle. Affected by the epidemic situation, the global uncertainty factors are increasing, and the demand for enterprise risk management is increasing day by day, and the market competition will be more intense. At the meeting, further enhancing the risk awareness of enterprises, strengthening risk management and innovating the current mode became the consensus of the participants.

Inventory pressure in excess cycle

At the beginning of this year, with the commissioning of two sets of ethylene glycol units in Zhejiang Petrochemical Co., Ltd., the reporter came to know about the two sets of ethylene glycol units put into operation in China.

As a big year for the production capacity of ethylene glycol, the pressure on the industry has increased significantly. According to preliminary calculation, the ethylene glycol production capacity will increase by 50% this year. At the same time, foreign countries also have new production capacity in 2019, which has formed new supply to China since the fourth quarter of last year.

"As of June 30, combined with the upstream and downstream capacity matching of the industrial chain, there are more than 3 million tons of ethylene glycol overcapacity in China, and more than 3 million tons of production capacity will be put into production in the future." At the meeting, Huang Weiting, head of the liquid chemical department of Zhejiang Dunhe Industrial Co., Ltd., said that at present, from the perspective of production cycle, ethylene glycol is in the period of overcapacity, and the market situation is more severe.

In Huang Weiting's view, another common problem in the overcapacity cycle is the large inventory. In the daily trading of ethylene glycol, the dominant inventory of the port is mainly referred to.

"From the data, the port has been in a state of high inventory this year, the inventory level has been close to last year's high point, and the current port tank capacity is basically saturated, the port inventory situation is still grim." From the perspective of the upstream and downstream of the polyester industry, the current level of Weiting has exceeded that of the polyester industry.

"As far as the ethylene glycol market is concerned, the core contradiction is still that a large amount of early-stage inventory has been accumulated under the compression of the supply side. At the same time, after the crude oil price enters the consolidation period, the squeezing effect of the cost side on the upstream profit is weakened. With the end of the overhaul period and the production of new production capacity, the supply faces double pressure again. However, the downstream demand is still affected by the impact of the previous epidemic, and the recovery is relatively slow, and the supply and demand side is still weak in the medium and long term Chuangyuan futures researcher Jiang Zihan said.

At the same time, it is expected that the polyester production will be weak in the first week of July.

In this regard, Huang Weiting also believes that from the impact of polyester on ethylene glycol supply and demand, the pressure of ethylene glycol supply and demand is relatively large, and the pressure will be more and more obvious. "At present, the ethylene glycol market will be in a relatively difficult cycle in the next year or two."

Enterprises actively use futures tools to avoid risks

In order to ensure the normal production and operation, it is very necessary for polyester enterprises to use futures hedging tools in the production cycle. At this point, the current industrial chain enterprises generally have a high awareness. It can be seen from the participation that the domestic upstream oil to ethylene glycol manufacturers are quite skilled in the use of futures instruments.

It is understood that a large domestic petrochemical factory has a production capacity of more than 1 million tons of ethylene glycol, which is an integrated unit, and the raw material for producing ethylene glycol is mainly naphtha. At the end of May, the company purchased naphtha through foreign trade market. The actual volume of naphtha in July was 30000 tons, and the unit price was 293 US dollars / ton. After the completion of the purchase of graptolite naphtha, the company conducted hedging operation through the 2009 contract of Dagang ethylene glycol futures, selling 2430 lots (equivalent to 24300 tons), with an average price of 3706 yuan / ton.

"At the end of July, the naphtha purchased by the company will be used for the production of ethylene glycol after arriving at the port and entering the factory. After the production is completed, the naphtha will be transported to an ethylene glycol delivery warehouse in East China, and the ethylene glycol warehouse receipt will be made in time." Huang Weiting said that after entering September, it can sell and deliver the goods through the rolling delivery of ethylene glycol futures of Dasheng stock exchange, deliver the goods to the buyer, and recover the payment for goods, so as to realize the profit cashing of the production. It is estimated that after deducting miscellaneous expenses, the theoretical profit of the enterprise is 146 yuan / ton.

In the downstream polyester market of ethylene glycol, most of them are sold in real goods, but some are sold in long-term futures, which usually lasts for one month at most. Due to the particularity of polyester bottle pieces, many manufacturers have received some long-term orders, some even received orders in January 2021. How to calculate the cost of long-term orders perplexes many bottle factories. At this time, it is a good choice for bottle chip enterprises to lock down the production cost of downstream orders through hedging with the help of futures tools.

It is understood that a bottle tablet manufacturer in Jiangsu Province received an order for domestic bottle tablets on June 4 this year. The delivery date is October, with the quantity of 5000 tons and the unit price of 5800 yuan / ton. "After confirming the order, the factory purchased 168 lots of ethylene glycol futures 2009 contract (equivalent to 1680 tons) through futures operation, with an average purchase price of 3690 yuan / ton, and 855 hands of PTA futures 2009 contract (equivalent to 4275 tons), with an average purchase price of 3706 yuan / ton. In September delivery, the corresponding raw materials can be obtained for production through futures delivery of the exchange. " Huang Weiting said that through this operation, enterprises can avoid the risk brought by raw material price fluctuation, and the production profit of this order is about 595.22 yuan / ton.

According to the participants, futures, as a financial instrument, can be used properly by enterprises to ease the pressure of cash flow, lock in profits, and hedge operational risks.

"The profits of oil to ethylene glycol enterprises are sometimes good or bad, and the volatility is large. Futures instruments can provide a guarantee for the production and operation of enterprises. For importers, profits can be stabilized by hedging. " Huang Weiting believes that in the capacity delivery cycle, ethylene glycol futures will provide great help to the long-term stable operation of industrial enterprises.

Promoting the combination of industry and finance and finding the focus

This year, affected by the epidemic situation, the uncertainty of global economic operation has increased, and the external risks faced by enterprises have increased. "This brings challenges to the risk management, competitive strategy and traditional business model of enterprises." Suzhou Chuangyuan and win Capital Management Co., Ltd. current business manager Xu Ming said.

In this context, the ability of risk management is one of the core competitiveness of real enterprises. Aiming at the risk points of industrial enterprises, many futures companies and risk management companies help enterprises identify and manage risks through field visits.

In Xu Ming's opinion, the application of risk management is mainly reflected in the combination of price difference investment and selective period cash arbitrage according to the inherent price difference relationship and trend law.

"For enterprises, the construction of trading strategy must have a logical driving force, which must come from the contradiction between futures and spot, and then design specific implementation path, aiming at some possible risk points, take some solutions to deal with it." Xu Ming said.

In fact, the idea of asset management should be used when the portfolio is constructed. When multiple Arbitrage Portfolios are parallel, low correlation portfolio should be constructed In his opinion, the initial investment model should be simple, and in the later stage, complex models, such as butterfly arbitrage, should be introduced gradually.

Xu Ming believes that it is a tool for enterprises to develop in the future.

"For spot enterprises, they should know more models and have more innovative models to make good use of futures derivatives. As a service institution, Chuangyuan futures will also actively explore new paths for the futures market service industry, further promote the function of the futures market, promote the combination of industry and finance, and promote the steady and healthy development of ethylene glycol industry. " Chuangyuan futures general manager Wu Wensheng said.