Cofco Futures: how Metallic Silicon related Enterprises use Futures for risk Management under Commodity Price fluctuations [Silicon Summit]

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At the 2021 (9th) Silicon Industry Summit solemnly held by SMM, Hu Bin, executive director of Cofco Futures Co., Ltd., mainly explained how metal silicon related enterprises use futures for risk management under commodity price fluctuations from three aspects: the new perspective of macro environment, metal silicon price risk assessment, and futures hedging risk management application.

New changes in supply and demand structure

Increased volatility: mismatch between supply and demand, inflation expectations, capital logic.

Stable domestic demand and threat of epidemic situation at the end of the year

The congestion index of domestic first -, second-and third-tier cities has risen significantly since September, and people's desire to travel has increased after the phased epidemic; after two major rounds of small-scale epidemics suppressed social activities, consumption showed a significant retaliatory law; after the summer consumption was suppressed, double section à double 11 à around the end of the year, consumption is expected to start a rolling peak season of domestic demand. The growth rate of public wealth has fallen from an average of 11% to an average of 5%, maintaining a positive value and providing positive support.

Traditional fixed investment and real estate investment continue to face pressure, the relative pressure to stabilize the tone to further accelerate the decline is more difficult to sustain in the short term; infrastructure bright spots gradually become clear; export resilience at least does not constitute a negative contribution; the overall economy is expected to rise during the year.

There is a huge deviation between the epidemic and environmental protection, and if the epidemic spreads again in many provinces, domestic demand will continue to weaken after double consumption falsification; pay attention to the development of the domestic epidemic and the spread assessment after the tipping point; the United States opened its border on November 8, so there is no need for quarantine to enter the country. pay attention to whether there is any change in the domestic border control policy and treatment of the epidemic; recently, double control of energy consumption has become increasingly fierce, and pay attention to the central government's evaluation of the negative impact of dual control.

Relationship between upstream and downstream of metal silicon industry chain

Factors affecting the price of metal silicon

Supply: in recent years, the overall growth trend of China's metal silicon market scale, entering 2021, China's metal silicon output increased significantly. At the same time, it is affected by power supply, double control of energy consumption and seasonal cycle.

Demand: the domestic demand is exuberant, the consumption of metal silicon is on the rise, the production and marketing rate is increasing year by year, and the new production capacity of organosilicon and polysilicon is put into operation.

Inventory: the increase of domestic trade demand and the decline of export volume lead to the continuous decline of metal silicon social inventory. Recently, due to the decline in prices, downstream wait-and-see-based, the emergence of accumulation.

Demand and Price trend of Silicon Metal

Demand growth: the production capacity of organosilicon and polysilicon has increased more, and the output and operating rate have increased significantly. New energy trends continue to boost demand.

Core logic: industrial structure and supply and demand state guide price fluctuation, price fluctuation feedback supply and demand adjustment.

Price orientation: the price is affected by macro factors and the structure of supply and demand, showing volatility, and the increase of volatility brings an increase in risk.

The main risks facing the Metal Silicon Market

The effect of hedging risk in Futures Market

Operation mode: stable operation, improving quality and increasing efficiency

Enhance the confidence of long-term order delivery, stabilize the operating rate in the off-peak season, optimize regional logistics, promote cross-regional sales, enhance market liquidity and improve capital efficiency.

Transaction form: flexible, convenient and effective

Raw material hedging VS direct hedging

Spot spot VS futures spot price

Arbitrage mode of disk virtual factory

Increased flexibility of long-term orders to facilitate downstream procurement

Market price: hedging, discovery price

Attract capital to enter, improve market liquidity; price discovery function, reduce price fluctuations, stabilize seasonal fluctuations; enhance price linkage between upstream and downstream, stabilize industrial profits.