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Research on Two-Way Hedging Strategy of Baosteel

In: Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)

Author

Listed:
  • Peihong Chen

    (Shandong University of Finance and Economics, College of International Economics and Trade)

  • Chenghang Jiang

    (Guangdong University of Finance and Economics, College of Finance)

Abstract

The iron and steel industry is the core industry of the ferrous metal industry and its development is related to the steady state and growth of the economy. As a world-class iron and steel conglomerate, Baoshan Iron & Steel Co., Ltd. Imports, produces, and consumes large amounts of iron and steel products. However, at present, the tense international situation has affected the normal operation of the steel industry. The share price of Baoshan Iron & Steel Co., Ltd. Has declined at the beginning of 2022 with the decrease in net profit. In this regard, this paper uses literature research, case analysis, comparative analysis, and other methods, and combines the concept of hedging to design a strategy for the hot-rolled coil which has the greatest impact on the company's profitability. Then we use the hot-rolled coil and its raw material iron ore futures and spot prices to evaluate the effect of hedging and compare the profit before and after taking the strategy, whose results show that the strategy can increase the proportion of gross profit, proving that the strategy is effective. In addition, the residual risk generated by the strategy is analyzed and some corresponding measures are put forward to improve the original plan, improving the feasibility of the strategy. Finally, the method of hedging strategy of steel enterprises is summarized. Based on the current international background, this hedging strategy is beneficial to the development of iron and steel enterprises.

Suggested Citation

  • Peihong Chen & Chenghang Jiang, 2022. "Research on Two-Way Hedging Strategy of Baosteel," Advances in Economics, Business and Management Research, in: Yushi Jiang & Yuriy Shvets & Hrushikesh Mallick (ed.), Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022), pages 42-51, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-036-7_8
    DOI: 10.2991/978-94-6463-036-7_8
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