[Ferro-Alloys.com]

  Hebei is the largest steel production province in China. Recently, the epidemic situation in Hebei Province has developed rapidly, but due to production and transportation concerning personnel and material flow, the impact is also different.

  Zhao Yongjun, researcher of the black Department of futures of China CITIC Construction Investment Co., Ltd., said that the frequency of personnel turnover in the production process of iron and steel enterprises is relatively low, and the prevention and control measures of enterprises are relatively strict, and the impact of the epidemic is limited. However, in the process of transportation, the flow of people is relatively frequent, the scope of personnel contact is relatively wide, the implementation of prevention and control measures is difficult, and the epidemic situation may lead to transportation interruption.

  The steel is loose in the north and tight in the South

  In winter, the demand for steel products is almost stagnant due to the influence of temperature and other factors. The price difference between the southern market and the northern market is widening. Steel mills and traders in the northern region take advantage of the situation to adopt low price policy and divert the steel resources to the south.

  With the continuous upgrading of epidemic prevention and control in Hebei Province, problems such as raw material supply and sales have a certain impact on the price of steel market. However, under the premise of effective control of the epidemic, there is still support for the price of steel.

  However, if the epidemic continues for a long time and the prevention and control of the epidemic in Hebei Province is further upgraded, problems in raw materials, poor transportation, limited personnel flow and other factors will seriously affect the production of steel plants, and the market will usher in substantial fluctuations at that time.

  Using the derivatives to solve problems

  The epidemic has brought obvious impact on the production and marketing of iron and steel enterprises in Hebei Province. Many iron and steel enterprises have actively taken measures to reduce the impact of the epidemic. Some iron and steel enterprises use futures, options and other financial derivatives to help enterprises solve the problems of high product inventory, tight supply of raw materials and large price fluctuations.

  At the same time, due to the shortage of transportation, the coke inventory of steel plants in Hebei area is digested quickly, and many enterprises are very short of coke resources. Some steel plants increase the virtual inventory by buying coke futures to avoid the risk of price rise caused by the shortage of coke supply.

  At present, there is still great uncertainty in the development of epidemic situation at home and abroad. It is suggested that the upstream and downstream iron and steel enterprises should fully assess the potential market risk, price risk and volatility risk in the production and operation activities in combination with their own costs, orders, inventory and capital, and choose their own hedging strategy to reduce the uncertainty in the production and operation process.

• [Editor:Catherine Ren]