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The chemical fiber industry is a bit difficult this year.

According to data from the National Bureau of Statistics, in the first half of this year, my country's chemical fiber output was 33.67 million tons, a weak positive growth year-on-year; the total profit was 16.4 billion billion yuan, a year-on-year decrease of 51.16.

In the face of such a market environment, how to use financial instruments to manage business risks, product price fluctuations and inventory? What issues should enterprises pay attention to when using PTA futures and staple fiber futures? What will Zhengzhou Commodity Exchange (hereinafter referred to as "Zheng Shang") do next in terms of serving the real industry and building a risk management tool system for the polyester industry chain?

Participate in hedging by judging the situation.

This year, international crude oil prices have generally remained high and fluctuated significantly. In early March and early June, WTI crude oil prices broke through $120/barrel twice; they fell to $106/barrel at the end of June and to $83.94/barrel in September.

China Fiber Net statistics show that in the first half of the year, the overall fundamentals of the polyester staple fiber market were weak. During this period, staple fiber factories even experienced negative cash flow. In July, the market trend of polyester staple fiber continued to decline, with poor demand and obvious price decline; in August, the market continued its downward trend, and the average monthly price of products in that month was 8014 yuan/ton, down 727 yuan/ton from June. From March to August, the production load rate of polyester staple fiber industry was 78.9, 66.5, 67.2, 72.2, 78.8 and 76.7, respectively.

Fujian Jinlun High Fiber Co., Ltd. (hereinafter referred to as "Jinlun High Fiber") has an annual output of 450000 tons of polyester staple fiber and 450000 tons of polyester filament. Lin Fengshou, deputy general manager of the company, said: "In this case, enterprises are generally contradictory. Because the finished products cannot be sold and a pile of inventory is placed in the warehouse, what should I do? At this time, polyester enterprises in the futures market hedging becomes a good choice. For example, a polyester company has a certain amount of PTA inventory, and when the PTA futures price rises to the right price, the company can sell this inventory to hedge. Of course, in this process, companies need to consider inventory costs to ensure that hedging is effective as a whole."

It is understood that Jinlun High Fiber applied in August 2017 to become the PTA futures delivery warehouse designated by Zheng Shang, which is the first PTA futures delivery warehouse in Fujian Province; in September 2020, it was registered as the short fiber delivery warehouse designated by Zheng Shang. At the end of February and early March this year, Jinlun High Fiber hedged in the futures market to reduce the company's inventory pressure.

Lin Fengshou introduced that at the end of February, considering the current price difference and the company's inventory, the company sold part of the PTA raw material inventory in the futures market to form a partial profit. "We were prepared at that time. If the price of polyester finished products rises later, the price of our finished products in stock will also rise, which is a good thing for the company. After a period of time, the company's finished product sales are still good, inventory has been reduced. On March 11, there was a correction in raw material prices, and the company's books were still profitable. But at this time, we re-examined the market situation and believed that the company would not necessarily deliver the goods in the future, so we chose to liquidate the raw materials in the futures market for profit."

Statistics from Zheng Shangsuo show that from January to July this year, the average daily turnover of PTA futures was 2.12 million lots, and the average daily position was 2.26 million lots. Corporate customers accounted for 50% of transactions and 82% of positions. PTA spot price correlation is as high as 0.99, with a cumulative delivery volume of 570000 tons.

From January to July this year, the average daily turnover of staple fiber futures was 240000 lots, with an average daily open position of 310000 lots; corporate customers accounted for 54% of transactions, 83% of open positions, and the correlation between futures and spot prices reached 0.98, with a cumulative delivery volume of 60000 tons.

Talking about the matters needing attention of enterprise hedging, Li Wenhuang, current manager of polyester industry department of Xiamen International Trade Petrochemical Co., Ltd., said: "If enterprises want to make good use of hedging, the core should pay attention to processing fees, inventory management and risk management. Focusing on processing fees, enterprises should flexibly adjust their hedging plans around their own judgments on processing fees, combined with the macroeconomic situation and industry prospects and expectations. At the same time, enterprises should pay attention to the time, quantity and direction of purchase, pay attention to control the degree of risk and margin, and make reasonable use of margin policies, such as registering the goods held on their hands into warehouse receipts, pledging, and reducing the occupation of funds. In short, on the basis of achieving expectations and profitability targets, the company will hedge the hedge, and the lock processing fee will lock the processing fee."

Lin Fengshou also said: "Futures is a tool, if used well, it can stabilize the efficiency of enterprises, but enterprises should pay attention to, the use of futures must take into account the financial strength of enterprises, but also with the enterprise's own business situation to match each other. For example, when using futures, according to the enterprise's monthly output, as well as the previous inventory of finished products and raw materials inventory comprehensive consideration, the corresponding support."

Multiple models lock in profits

Whether it is PTA futures or staple fiber futures, polyester companies have also formed a variety of models based on hedging. Among them, the "base spread price" model has been widely used in the polyester industry this year.

Xinfengming Group currently has an annual output of 6.3 million tons of polyester filament, 600000 tons of polyester staple fiber and 5 million tons of PTA. This year, in the face of the unpredictable market, the new Fengming actively use the base price and other models to protect production operations.

Zhang Sixi, assistant to the president of Xinfengming Group, said that in July this year, domestic polyester factories saw a negative reduction in production, which increased the inventory pressure of PTA factories. In the face of this situation, the new Fengming in the reduction of the start load, a certain amount of PTA in the futures market to implement "point price sales".

On average, Xinfengming completed the point price (350 yuan) at the price of 5900 yuan/ton. Compared with the average daily spot price of 5750 yuan/ton on the date of signing the contract, this price has increased by 500 yuan/ton; compared with the average monthly spot price of 6170 yuan/ton, it has increased by 80 yuan/ton.

"For the buyer, by buying the hedge in advance on the futures disk, the risk of PTA price increases is avoided. For Xinfengming, by locking in the basis spread, the price of the futures disk is increased in batches, reducing the pressure on raw material inventories." Chapter Four Xi said.

Li Wenhuang also introduced: "After the listing of staple fiber futures, the industry has newly added a 'basis point price' pricing model, including pre-point price and post-point price. The basis trade has gradually become popular in the polyester staple fiber industry in recent years."

In addition to the "base spread price", polyester companies can also use futures tools to establish virtual inventory.

Lin Fengshou introduced: "Polyester enterprises can buy PTA raw materials in the forward market, but these goods do not have to be sent to the factory, thus forming a virtual PTA inventory. By establishing a virtual inventory, the capital cost of polyester enterprises can be saved."

At the same time, the use of polyester industry chain multiple futures tools, polyester enterprises can also carry out "virtual factory arbitrage", the formation of raw materials and polyester products between the price difference arbitrage.

Lin Fengshou introduced that the main raw materials for the production of polyester products are PTA and ethylene glycol. When the total raw material cost of PTA and ethylene glycol is 5000 yuan/ton, the cost of producing polyester staple fiber is about 6000 yuan/ton, but also need to add a certain processing cost, usually 1000 yuan/ton processing cost for polyester enterprises belong to the capital preservation operation. After considering these costs, when does a firm engage in positive arbitrage?

"When there is a high profit in staple fiber futures, companies can buy in the PTA futures market and sell on staple fiber futures to achieve a spread of 1500 yuan/ton -2000 yuan/ton, thus realizing the arbitrage of the virtual factory. Of course, it is important to realize that the return of high profit in the value of the futures market takes some time, which could be 1 month or half a year." Lin Fengshou said.

Conversely, if the profit of the polyester finished product is at a loss, the company can reverse arbitrage in the futures market.

"When the actual production of the staple fiber plant is at a loss, the company can reduce the production load of the physical plant and sell PTA raw materials and buy staple fiber in the futures market to achieve reverse arbitrage. From a practical point of view, the subsequent arbitrage in the futures market will be profitable as long as the company's production returns to normal profit levels." Lin Fengshou said.

Li Wenhuang introduced: "Enterprises can lock in profits, through the use of PTA, ethylene glycol and staple fiber futures varieties, according to the changes in the processing range in the futures market to build virtual factories, lock in processing profits, and use staple fiber futures for cross-month hedging, management of virtual inventory. If the market is high before and low after, that is, the price in the near month is higher and the price in the far month is cheaper, on the basis of ensuring normal production, the enterprise can sell the excess staple fiber inventory in the form of spot, or sell the near month contract, and buy the same goods in the far month contract, so as to flexibly manage the inventory, activate the funds, and earn the price difference between the current and the contract. However, enterprises should pay attention to control the risk of futures accounts; if they are far away from the futures warehouse, they should also pay attention to ensuring the safety stock of production, and pay attention to the warehouse receipt brand and warehouse address. Overall, polyester factories are currently switching more smoothly between different futures varieties."