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On the first day of the listing of PP futures, the 1st two orders were won by Sino-agri Tongyong Chemical Co., Ltd. and Zhejiang Jiuxin Chemical Co., Ltd. Sino-agri started selling PP1405 contracts at the call auction stage through China International Futures Co., Ltd.; and Zhejiang Jiuxin Chemical Co., Ltd started buying PP1405 contracts at the call auction stage through the seat of Nanhua Futures.
Sin-agri Tongyong Chemical Co., Ltd. (“Sino-agri Tongyong” for short) is a holding subsidiary reorganized from the former Agricultural Film Department of China National Agricultural Means of Production Group Corporation. For more than a decade, it has specialized in plastics raw materials import and domestic sales business of PE, PP, EVA, and metallocene, and it is also one of the state-owned enterprises that have engaged in plastics raw materials in China. Its products are concentrated in major import ports including Shanghai, Ningbo, Qingdao, Huangpu, Tianjin, and Dalian and its business spreads across major provinces in China with the annual trading volume of over 200,000 tons.
China International Futures Co., Ltd. is the brokerage service provider of the first order of PP 1045 contracts. Wang Ke, Managing Director of China International Futures, said that Sino-agri Tongyong obtaining the first order of PP1405 contract is a PP enterprises developed by its “Chemical Industry Chain Development Program”. Before the listing of PP futures, Sino-agri Tongyong, with the assistance of China International Futures, has established the future department with complete personnel allocation and perfect risk control system, and it has been active in designing the first trading scheme oriented to corporate client. Sino-agri Tongyong successfully got the first order of PP1405, PP1409, and PP1501 contracts, which is a beneficial practice in utilizing futures market to avoid risk in a well-planned and systematical way.
Gao Chunmin, General Manager of Beijing Industry Center of China International Futures, introduced that LLDPE and PP are both synthetic resin and their major raw materials are from crude oil. As they are of the parallel relation in the industry chain, their spot goods are of great relevance. Since 2006, the factory price correlation of micro-fine PP and LLDPE has reached 0.82 and relevant enterprises have the demand to participate in futures hedging. Previously, DCE has launched LLDPE and PVE two futures products successively. China International Futures has achieved great success in industry customer development and service of these two products, and relevant enterprises in North China and South China have formed a constellation effect in China International Futures. Paying attention to and expanding PP corporate customers is the continuance of the “Chemical Industry Chain Development Program”. Since 2013, China International Futures has started to prepare for the promotion of such new products as PP, and it has carried out in-depth discussion and cooperation with enterprises in terms of industry chain research, enterprise capital operation and market value management, investment strategy, production process management, and operation risk control. At present, a group of relevant traders have been successfully developed through LLDPE trading enterprises, conferences, visiting enterprises. Due to the slow-down of economic growth and the impact of coal chemical PP, the PP market has been over supplied, and relevant enterprises have faced the operational difficulties and the need of structural adjustment and trade transformation. The launch of PP futures has timely enriched the trading and hedging methods of relevant enterprises, and it can better satisfy enterprises’ risk-avoiding demands at the present circumstance.
An official of Sino-agri Tongyong said that Sino-agri Tongyong’s obtaining of the first PP futures order has opened the prelude of participating in PP futures market. Previously, in order to participate in the hedging business of PP futures as soon as possible, Sino-agri Tongyong has made lots of preparation. It has set up the futures business department, organized business staff to conduct lots of research, study, and training in DCE and relevant enterprises, and formulated corresponding hedging process and strategy, which have laid a solid foundation for its participation in futures hedging. The choice of short selling in futures market is a decision made under the present situation of predicted increase of PP supply and the possible fall of its price in the second quarter. Therefore, it’s a hedging practice made by combining its own spot goods position.
He said that the active participation in PP futures hedging business will not only help enterprises avoid risks, but also promote the transformation of company’s business. The listing of PP futures product will significantly promote the development of enterprises in this industry. Sino-agri Tongyong believed that this efficient risk management platform will help to avoid the downward tendency of the PP market and can fully bring off futures’ price-finding function, so as to being able to adjust prices ahead of the market and clients. Besides, the active participation in PP futures will help to consolidate the leading position of Sino-agri Tongyong in the plastics industry. At last, PP futures will not only help to avoid risks and provide hedging instruments, but also set up the risk consciousness for enterprises, manage inventories, and forge a transformation in sales model.
Under the market-oriented regulatory concept of the China Securities Regulatory Commission, the listing pace of new domestic futures products has been accelerated, and more and more futures companies have paid increasingly important attention to the market opportunities to be brought about by the new products. Wang Ke said that the successful listing of PP futures on February 28 is not only the increase of a single product for futures companies, but also symbolizes the continuation and improvement of the chemical industry chain risk-avoiding system, so that futures companies can provide more complete and more effective hedging methods for industry customers and increase industry’s service capacity. Meanwhile, the listing of PP futures will also provide more business expansion opportunities for futures companies, expand the client structure of futures companies, and thus bring more profit-growth points to companies’ operation.
