Just now, Mr. Bing had this picture. Of course, my plan is more concerned about the profit of the inner disk. You can see that there is a relatively high profit between February and March this year. Of course, compared with historical highs, it is not very exaggerated.
After the end of April this year, profits went up further, reaching a level comparable to the historical level, which is still considerable. Of course, spot profit is a little exaggerated than futures. Of course, just now, Mr. Bin analyzed a lot of things, and I agree with him very much, that is, the overall production capacity is limited, and when the demand is not weakened, the profit will easily soar.
What does it mean to see this picture? It shows that the life of steel mills is quite easy at this time. Why is it so easy? We see that there may be two reasons. On the one hand, field drive. At the same time, we can see that the entire financial market has a pricing for forward prices in the futures field, telling steel mills that your life will be good not only today, but also for a long time. ?
I want to analyze the current market situation from the perspective of steel mills. Of course, everyone talked a lot about shorting, and rebar itself is in a relatively strong stage. But now it is basically a situation that needs to be prepared for danger in times of peace. That is, you may encounter different situations later, but it is good on the whole, but in some cases, the overall thread profit will gradually go down. Then at this moment, that is, from the whole financial end to the industrial end, when you should live a good life, you should use financial-related means to hedge related good profits.
Of course, we talked a lot with steel mills. They talked about the gradual recovery of profits from negative values last year. Many steel mills hedged from the period of profit 100 yuan in 200 yuan and missed the big market behind. It is also possible.
But more importantly, if this happens, at least in places with relatively high profits, partial hedging can be carried out. Master the rhythm of hedging and help enterprises operate smoothly.
Just now I mentioned the current macro and industry. From the perspective of profit, or the whole focus is on the price of rebar, everyone has some opinions. I'll try to sum it up. The first is that the annual economic trend is high before and low after. Some people say that the front may be better, but the back is not good. This is reflected on the disk. Of course, the current profit, the profit of the disk is far lower than the spot. But at the same time, it is still at the highest level in history.
Second, the thread profit mentioned by the steel itself is at a historically high level and has been maintained for some time.
Third, Teacher Bin talked a lot just now. The starting situation of electric arc furnace is not completely clear, and I don't know whether it will go up or down, but the focus of the whole market, from the industrial point of view, is concentrated on this factor. In other words, if it goes up, the profit of rebar may fall rapidly. If it has been difficult to start the EAF, rebar may soar. Anyway, the market is divided.
We are more concerned about this point: from a financial point of view, what is the positioning of steel mills? In fact, you think it's natural to make more profits, right? That is, the higher the profit, the more comfortable you live, and the lower the profit, the more uncomfortable you live. This is from the perspective of trading. If you are a pure trader, or a pure industrial fund, and you don't have any positions when you enter the market, you will wonder whether I am long or short today.
For example, when the profit is 200, I choose to do more. If the profit goes up, you will earn, and if the profit goes down, you will lose. If you are a steel mill, the position is already in hand. At this time, consider this issue from the perspective of trading, and more importantly, consider when and where my position will be even. From the perspective of trading, we usually say that there is no room for the position to rise, and you have to flatten it. From the perspective of steel mills, what do you think of this problem? In the futures market, when to close the position is a cooperative hedging behavior in the spot market. For example, if you are bullish, such as whether to hedge 10% and 20% of the output.
If you have such an idea, you should also conduct appropriate operations in the futures and spot markets. The following point, as I mentioned just now, is that under the combination of industry and finance, the rebar market has gone out of a very profitable trend this year. At this time, it is necessary to discuss how to lock in profits as an industrial enterprise, so as to realize the hedging of profits mentioned in the third point, and how to help steel mills achieve better and more stable operation.
Again, be prepared for danger in times of peace. Of course, we have a good time at this time, but suppose the overall macro situation in the fourth quarter is very poor, so bad that steel mills suddenly get negative profits for some reason. Then you will regret that you didn't make appropriate hedging actions to lock in the relevant profits at such a time. From this perspective, if we push back to today's time. It may be necessary to take measures in advance to protect this value.
Of course, we talked a lot just now, and I feel that many friends have talked about this topic today, such as the friends in Nangang just now. I think this is a good trend. At present, the whole industry has a deeper understanding of hedging and how the whole financial side serves the industry. In this venue, there will be more profound topics, and everyone will sit together to discuss related issues.
I have listed several feasible hedging schemes here, which I believe everyone is familiar with. Let me briefly introduce what we have introduced here. The financial plan is very simple. Assuming that the annual output of our steel mill is 7 million tons, maybe I will consider the total amount of hedging I need in one year and put this amount into it as a whole. Of course, there are also many problems.
For example, if you really set a turnover of 7 million tons, the whole futures market can't bear it. We will talk about how to deal with similar problems later. If you do such a thing, the market can't bear it. But you try to achieve 10% annual output and 20% annual output in the market. Even if you are rolling hedging, in every contract, at this moment, you cover the output in the next three to four months, or 50% of the output in the next three to four months. These are all appropriate ways to help you lock in the relatively rich profits on the disk.
Of course, I also wrote a variable method here. Let me briefly mention that if iron ore is mainly foreign ore, we can use the way of Shenzhen Stock Exchange to hedge the turn (down) period. What are the advantages of the disk method I just mentioned? Better liquidity. If you produce hundreds of thousands of tons, you can achieve better liquidity on the whole disk, and hedging can now reach one year, which is the length of futures.
What are the disadvantages? Just mentioned a lot, the first liquidity has an upper limit. If standard steel mills hedge, there is an upper limit to liquidity. Secondly, the pressure of the deposit, we help some companies to calculate, for example, you do about 500 thousand tons, which may account for hundreds of millions of funds. For some companies, at least they are not willing to pay a sum of money to do a business that may lose 50%. This is the current view of steel mills.
The other is basis risk. Because the futures main contract is 1, 5, 10 cycle, or 1, 5, 9 cycle. Will cause the risk of hedging. Of course, the main thing is to look back. At present, some trading companies are also providing some new ways, such as whether the real goods can be locked.
Similarly, according to the material ratio, can we lock in the total demand for raw materials in the next three to four months and oversell raw material wires (fresh materials? )。 The risk of basis difference is completely avoided. The basis risk is borne by traders, who have more experience in dealing with such risks and are a better means for steel mills to hedge risks. The shortcomings are also obvious, and the liquidity is poor. Similarly, you also need the help of the spot dealer to complete the hedging method. This is the disadvantage of the spot.
We can see that both the two schemes just now have a defect, and the way of hedging is a fixed-price contract. If we talk to many steel mills here, can we lock prices with steel mills in some non-fixed price ways? Maybe it can bring more flexibility. Of course, there is also a common way of non-fixed price contract, which is the option method introduced by a guest just now. Perhaps its focus is on an SGX option contract and a domestic far-month contract.
But options can be applied not only to disks, but also to any topic. We now offer some rebar profit options as the theme. In this way, we can see that a trader has signed a six-month trade contract with a steel mill. We use the formula selected by the steel mill as the target of our settlement. ?
There are several varieties, such as rebar, coke and iron ore. You can take the disk as the theme and use it as the price difference, MINUS some fixed costs. Take this as the theme, and then after half a year, of course, we choose a delivery date.
For example, from now on, 1 1 for the whole month, we want to see the total price difference of rebar, iron ore and coke. If the disk profit is less than 700/ ton, the steel mill can take away the subsidy of 100 yuan/ton for free. If the profit due is higher than that of 700 yuan, the steel mills need to pay the profits of 700 yuan to the traders. ?
If you analyze the content of such a contract, you will find that it is very similar to the profit and loss that the option gives you. Actually, this contract is divided into two parts. First, if the industrial form is not good, if the profit reaches a relatively low position, or even if the profit stays in this position, you actually take 100 yuan more. This is to improve your current situation. ?
On the other hand, which contract is better? If the profit is higher than that of 700 yuan, you have to give the extra part to the trader, but what does it bring you? If the profit is higher than that of 700 yuan, then in the production process, the profit will only be higher, not lower. Usually, the profit level of the disk is lower than the spot, which means that you will live better than now, and you just pay a certain cost to the trader. ?
It also locked in the current profit level and obtained certain subsidies. As you can see, it is actually equivalent to transferring some of your profits to some poor situations when you may get good production profits in the future. If the profit is poor, you can take out the extra profit in that case and subsidize your poor situation. That is to say, it is consistent with what we said before why such a contract helps steel mills hedge under such circumstances. ?
The so-called hedging is a very good situation and a very bad situation. Through a form of contract or spot transaction, the possible fluctuations in the future will be erased and turned into smooth operation. Whether the profit is high or low, it is the same profit level.
What else is in this contract besides the methods just mentioned? We think it is a good thing to increase the flexibility of hedging and get additional subsidies in the case of low profit or high profit.
The flexibility of hedging can be seen in this contract just now. In fact, in the process of chatting with customers, we can not only provide steel contracts, but also extend many other ways within this scope, which can be customized according to customer needs. For example, just mentioned, what kind of profit formula do you use and what kind of profit do you choose as the settlement node?
For example, 700 yuan or 200 yuan, or zero yuan or less, allows steel mills to flexibly design hedging contracts and hedging schemes according to their own output. As you can see, this is actually an off-site contract to achieve some forms of hedging that are difficult to achieve in the market. What does it offer compared with the site? It provides a series of flexibility.
In this process, traders and steel mills, as well as other banks, will also provide corresponding services. They can help steel mills issue credit and use collateral to guarantee potential payments. If this method is adopted, it is actually a form of cooperative hedging to help steel mills achieve some risk hedging purposes of related operations with their own funds. This may help the steel mills. Of course, this is not the case now. Now the steel mills are living well and the funds are very loose. If the funds are not so loose, many ideas seem to have greater advantages.
What we mentioned just now is actually a typical example. Recently, I have communicated with many enterprises of various entities. Of course, we also provide richer risk management tools, including futures OTC options. Just now, General Manager Jin Lu also mentioned related varieties. For rebar, coke, thermal coal and other varieties, we can provide OTC options related to this and trade with customers.
Secondly, a client came to talk to us. For example, in the futures market, there may be some situations where hedging is not very comfortable and the basis risk is difficult to control. They prefer to hedge with some port spot indexes. We are also actively discussing with customers whether we can provide products to customers in this way.