29
Methanol futures: Achieving win-win development in a weak industrial cycle
2023/7/17
A feeling, a persistence. In March 2023, the chemical sales team of ENN Natural Gas Co., Ltd. (hereinafter referred to as ENN) and the chemical sales team of Guanghui Energy Co., Ltd. (hereinafter referred to as Guanghui Energy) conducted a "one-to-one" empowerment in Hangzhou on-site communication. At the meeting, the two companies jointly discussed the problems encountered in the actual operation process and the solutions. This is not only a "ideological collision", but also a commitment to the "agreement".
A reporter from Futures Daily learned that Xinneng (Tianjin) Energy Co., Ltd., a subsidiary of ENN, is the construction unit of the "industrial base" of ZCE. As representatives of private energy and chemical companies, ENN and Guanghui Energy have been learning from each other and growing together for many years. Counting the time, this is already the Nth offline communication between the two parties in three years. From the initial ignorance of the futures market to the development of various futures and spot transactions, this change in Guanghui Energy's business thinking is a profound change made under the weak cycle of the methanol industry, and its growth is also inseparable from ENN. Positive drive over the years. Today, Guanghui Energy has actively participated in the futures market with ease.
In fact, for the "industrial base", there is always a belief, and this is also an "agreement" with the futures market: insist on meeting the risk management demands in different business scenarios, and achieve a win-win situation with customers in the industrial chain At the same time, with the help of futures tools, it will gradually realize the upgrade from a traditional industrial enterprise to a service-oriented enterprise. At present, not only ENN, but also more and more "industrial bases" have kept their original aspirations and perseverance under this "agreement".
From conservative to seeking change, the business thinking of production enterprises has quietly changed
In the methanol industry chain, downstream consumer companies and traders are the "main force" in the futures market.
Before 2020, when serving upstream methanol companies, He Zhensheng, head of the Futures Department of ENN Chemicals, had clearly felt that upstream companies in the methanol industry chain participated in financial derivatives at a relatively slow pace. "Because participating in futures is not just a simple trading order, but also involves the adjustment and establishment of a whole set of financial and assessment management systems, production companies often have no relevant experience, it is difficult to control risks, and they are worried about problems. One thing is worse than one less thing'," he said.
During the interview, the reporter learned that since 2020, the methanol industry has entered a weak industrial cycle. In the face of complex and ever-changing market conditions, many companies feel "powerless". Only through production optimization to increase production and reduce costs cannot completely resist the losses caused by fluctuations at both ends of the purchase and sales. restricted.
At the same time, the sales model in the northwest region of the main production area is also quietly changing, and the price trend is closer to the East China market. In addition, the start-up of Tianjin Bohua Chemical Co., Ltd. has also attracted international methanol into the northern market of my country. Tianjin has continuously received imported methanol. In the process of restructuring the industrial structure, regional market competition has become more intense.
"This forces companies to upgrade their business, and needs to find bright spots and breakthroughs. This has also prompted a group of companies to actively learn about futures and participate in futures." He Zhensheng said.
He Zhensheng told reporters: "At present, many private upstream enterprises in the methanol industry have really participated in the futures, especially in the past three years, they have thrived in the tempering of risks, fully trained the team, optimized the trading system, and tested risk control. Mechanism, the enterprise grows very fast.”
The reporter learned that although many upstream state-owned production enterprises of methanol are still unable to directly participate in the futures at this stage, the managers and market practitioners of the enterprises have been able to fully understand the importance of futures functions and have a clear understanding of various futures and spot models. cognition. "Although I didn't directly participate in the futures, I have taken the futures market as an important reference when formulating the company's business strategy and product sales strategy, and can fully consider futures changes in pricing." He Zhensheng said.
Opening up a new game in a changing situation, striving to start again
As representatives of private enterprises, ENN and Guanghui Energy started their relationship with spot natural gas, and have extended cooperation in methanol, ethylene glycol and other products. For more than 20 years, the two parties have been very good partners.
The reporter learned that after years of development, the quality of the management team of private enterprises is improving, and many advanced management tools have been introduced, and futures is one of them.
In He Zhensheng's impression, during the stable period of the methanol industry, mainland enterprises have a cost advantage and the market risk is relatively small. However, with the gradual rise of the combination model in the mid-term of the market, Guanghui Energy has gradually realized the impact of the new model on the future product sales of mainland enterprises. Enterprises began to actively learn, participate in a small amount, and then learn again to achieve the expansion of transaction scale.
Especially since 2020, the sharp fluctuations in market prices have caused Guanghui Energy to feel more and more pressure, and it has also seen many explicit market risks, most of which are beyond the company's own traditional cognition.
As a private enterprise, Guanghui Energy has the driving force for innovation. Seeing that companies in the same industry are actively participating in the futures market, in order to maintain market competitiveness, entering the futures market has become the only way for Guanghui Energy to develop.
"In 2020, the first methanol futures-related exchange was held in Langfang, Hebei, and we explained our trading philosophy. Afterwards, the sales team of Guanghui Energy Chemical also actively visited and studied key customers in China, and began to try to participate in futures. Later , Guanghui Energy began to use futures prices for factory long-term contract settlement, but there were few models, and only related business was carried out around Xinjiang factories. During the period, the company made some attempts to improve the futures awareness of the entire company's management, and also saw the futures play a role role." He Zhensheng recalled.
Starting from 2022, Guanghui Energy hopes to expand the trading model and carry out multi-scenario trade, especially to achieve breakthroughs in markets outside Xinjiang. It also realizes that the rapid development of business requires the close integration of futures instruments. At this time, it is urgent to optimize the operating mechanism . It just so happened that in August of that year, there was an opportunity that Guanghui Energy's futures team was working in other places. This time, the company came to Langfang again to communicate with ENN for more than half a month.
"Through this exchange, we found that the personnel of Guanghui Energy actually have strong futures trading capabilities. What is lacking is how to combine the actual situation of their own company with futures. In addition, there are obstacles in the corporate mechanism that need to be further optimized "He Zhensheng told reporters that during the period, the two sides worked together every day, giving full play to their respective advantages and learning from each other. ENN has also learned from Guanghui Energy's experience in using futures to price its products, and at the same time learned about the trading knowledge of varieties other than methanol products.
In fact, in the methanol industry, many upstream companies like Guanghui Energy have made positive changes. The weak cycle of the methanol industry forces companies to start a new game amidst the changing situation.
In He Zhensheng's view, not all companies have made changes in the methanol market, but more and more large companies have met certain conditions. "It needs to be pushed again to let the company break out of the cocoon, and this is also the focus of the 'industrial base' work in 2023. Find the core issues that prevent companies from participating in futures, and coordinate various resources under the empowerment of all parties in the market. Solve the last problem of the enterprise," he said.
"For real enterprises, futures can be icing on the cake and can give charcoal in a timely manner, but they cannot be created out of nothing. Industrial enterprises should give full play to their industrial advantages, combine procurement and sales scenarios, and use the combination of futures and cash to seize market opportunities and create marginal value." He Zhensheng He said that the enterprise should design the futures model based on the current business situation, adhere to the spot business as the basis, only make futures products with spot channels, and achieve corporate goals through "deep self-awareness + market awareness + futures application".
Demonstrate responsibility and achieve win-win development in the weak industry cycle
In the weak cycle of the industry, how to transform and break through and win in danger has also become an important issue for methanol-related enterprises. The reporter learned that in the face of the weak industry cycle, many methanol industry enterprises, especially the "industrial bases", have done a good job of protecting the value of their products, closely integrating the hedging business with the company's production and operation, and achieving a steady increase in the scale of hedging.
It is understood that Xinao insists on long-term hedging, and will explore a combined hedging strategy from 2022, initially establish a virtual factory calculation model, conduct comprehensive profit monitoring, try to lock in the price to lock in the profit, and strive to achieve all-round risk hedging .
"Generally, mainland production factories only carry out selling hedging, which limits the factory's operating space and limits the scale of hedging under the condition of strong futures-current basis and low prices. We comprehensively considered market prices, inventory conditions, and mainland The price difference between current and futures, and the purchase of hedging has improved the continuity of the hedging of production enterprises, and realized the reduction of production and operation costs." He Zhensheng said that, in addition, through the way of combined hedging, ENN Energy has avoided the rise of raw materials. The uncertainty brought to hedging is conducive to expanding the scale.
"In this way, enterprises can also reserve raw materials for production in advance, avoiding the shortage of raw materials caused by logistics delays and tight product supply and demand, and ensuring the stable production of the factory. It also has the opportunity to revitalize the raw material inventory assets and realize the value-added profit of the raw material warehouse." He Zhen holy name.
As an "industrial base", Xin'ao cooperates with upstream, midstream and downstream enterprises in multiple regions to carry out arbitrage and basis trade business. In the weak industry cycle, through mutual guarantee of supply from upstream and downstream, it solves logistics obstacles, product price fluctuations, and corporate operating losses. and other issues, make full use of the mutual advantages of both parties, and serve the real industry to the maximum extent to achieve stable operation when extreme market conditions appear.
Taking the week of June 15, 2022 as an example, the profit of methanol downstream MTBE rose to a record high of nearly 3,000 yuan/ton. A factory in Shandong hopes to sell more MTBE forward delivery orders in July to lock in more profits, but is afraid that the price of raw material methanol will rise in the future, which will cause losses in production.
"The price of methanol on the north line of Inner Mongolia was 2420 yuan / ton that week. We are bearish on the market outlook and hope to lock in the sales price. Because the current Northwest spot and futures price difference is relatively strong, it is most suitable to sell forward spot. The price is 2460 yuan / ton to this customer Supply 5,000 tons of methanol, and the agreed delivery period is July 1-30, 2022. Each has locked the purchase and sales prices, and realized mutual guarantees." He Zhensheng introduced that for this business, Xinneng has locked in a high price. The downside risk is hedged, and the selling price of the product is 40 yuan/ton higher than that of spot selling. For the Shandong MTBE factory, after locking in the cost of raw materials, it dared to increase the pre-sale orders of products in July, and finally gained more profits.
The reporter also observed that after years of growth, the "industrial base" has paid more and more attention to the maintenance and cultivation of customers in the industrial chain. "Every enterprise in the upstream and downstream is an important part of the industry ecology." He Zhensheng said frankly that he hopes to establish a non-game and non-contradictory relationship with the upstream and downstream, so that they can clearly understand each other's needs, and the two sides will grow together win.
"Especially in the current weak industry cycle, we not only hope that we can hedge risks, but also hope that companies in the industry chain can participate directly or indirectly, embed futures and spot business into the daily trade cooperation process, and help companies lock in costs and orders together profits, give full play to their respective advantages, implement strategies together, and achieve a win-win situation.” He Zhensheng said.
After getting in touch, the reporter can clearly feel that at present, for some enterprises that value innovation and change, they very much hope to improve the activity of futures and cash transactions of industrial enterprises through model innovation. On the one hand, when selling products, we can have a richer sales model; on the other hand, we also hope to cultivate professional and reliable participants in the region. Only with more participants can we have the possibility of continuous innovation.
A reporter from Futures Daily learned that Xinneng (Tianjin) Energy Co., Ltd., a subsidiary of ENN, is the construction unit of the "industrial base" of ZCE. As representatives of private energy and chemical companies, ENN and Guanghui Energy have been learning from each other and growing together for many years. Counting the time, this is already the Nth offline communication between the two parties in three years. From the initial ignorance of the futures market to the development of various futures and spot transactions, this change in Guanghui Energy's business thinking is a profound change made under the weak cycle of the methanol industry, and its growth is also inseparable from ENN. Positive drive over the years. Today, Guanghui Energy has actively participated in the futures market with ease.
In fact, for the "industrial base", there is always a belief, and this is also an "agreement" with the futures market: insist on meeting the risk management demands in different business scenarios, and achieve a win-win situation with customers in the industrial chain At the same time, with the help of futures tools, it will gradually realize the upgrade from a traditional industrial enterprise to a service-oriented enterprise. At present, not only ENN, but also more and more "industrial bases" have kept their original aspirations and perseverance under this "agreement".
From conservative to seeking change, the business thinking of production enterprises has quietly changed
In the methanol industry chain, downstream consumer companies and traders are the "main force" in the futures market.
Before 2020, when serving upstream methanol companies, He Zhensheng, head of the Futures Department of ENN Chemicals, had clearly felt that upstream companies in the methanol industry chain participated in financial derivatives at a relatively slow pace. "Because participating in futures is not just a simple trading order, but also involves the adjustment and establishment of a whole set of financial and assessment management systems, production companies often have no relevant experience, it is difficult to control risks, and they are worried about problems. One thing is worse than one less thing'," he said.
During the interview, the reporter learned that since 2020, the methanol industry has entered a weak industrial cycle. In the face of complex and ever-changing market conditions, many companies feel "powerless". Only through production optimization to increase production and reduce costs cannot completely resist the losses caused by fluctuations at both ends of the purchase and sales. restricted.
At the same time, the sales model in the northwest region of the main production area is also quietly changing, and the price trend is closer to the East China market. In addition, the start-up of Tianjin Bohua Chemical Co., Ltd. has also attracted international methanol into the northern market of my country. Tianjin has continuously received imported methanol. In the process of restructuring the industrial structure, regional market competition has become more intense.
"This forces companies to upgrade their business, and needs to find bright spots and breakthroughs. This has also prompted a group of companies to actively learn about futures and participate in futures." He Zhensheng said.
He Zhensheng told reporters: "At present, many private upstream enterprises in the methanol industry have really participated in the futures, especially in the past three years, they have thrived in the tempering of risks, fully trained the team, optimized the trading system, and tested risk control. Mechanism, the enterprise grows very fast.”
The reporter learned that although many upstream state-owned production enterprises of methanol are still unable to directly participate in the futures at this stage, the managers and market practitioners of the enterprises have been able to fully understand the importance of futures functions and have a clear understanding of various futures and spot models. cognition. "Although I didn't directly participate in the futures, I have taken the futures market as an important reference when formulating the company's business strategy and product sales strategy, and can fully consider futures changes in pricing." He Zhensheng said.
Opening up a new game in a changing situation, striving to start again
As representatives of private enterprises, ENN and Guanghui Energy started their relationship with spot natural gas, and have extended cooperation in methanol, ethylene glycol and other products. For more than 20 years, the two parties have been very good partners.
The reporter learned that after years of development, the quality of the management team of private enterprises is improving, and many advanced management tools have been introduced, and futures is one of them.
In He Zhensheng's impression, during the stable period of the methanol industry, mainland enterprises have a cost advantage and the market risk is relatively small. However, with the gradual rise of the combination model in the mid-term of the market, Guanghui Energy has gradually realized the impact of the new model on the future product sales of mainland enterprises. Enterprises began to actively learn, participate in a small amount, and then learn again to achieve the expansion of transaction scale.
Especially since 2020, the sharp fluctuations in market prices have caused Guanghui Energy to feel more and more pressure, and it has also seen many explicit market risks, most of which are beyond the company's own traditional cognition.
As a private enterprise, Guanghui Energy has the driving force for innovation. Seeing that companies in the same industry are actively participating in the futures market, in order to maintain market competitiveness, entering the futures market has become the only way for Guanghui Energy to develop.
"In 2020, the first methanol futures-related exchange was held in Langfang, Hebei, and we explained our trading philosophy. Afterwards, the sales team of Guanghui Energy Chemical also actively visited and studied key customers in China, and began to try to participate in futures. Later , Guanghui Energy began to use futures prices for factory long-term contract settlement, but there were few models, and only related business was carried out around Xinjiang factories. During the period, the company made some attempts to improve the futures awareness of the entire company's management, and also saw the futures play a role role." He Zhensheng recalled.
Starting from 2022, Guanghui Energy hopes to expand the trading model and carry out multi-scenario trade, especially to achieve breakthroughs in markets outside Xinjiang. It also realizes that the rapid development of business requires the close integration of futures instruments. At this time, it is urgent to optimize the operating mechanism . It just so happened that in August of that year, there was an opportunity that Guanghui Energy's futures team was working in other places. This time, the company came to Langfang again to communicate with ENN for more than half a month.
"Through this exchange, we found that the personnel of Guanghui Energy actually have strong futures trading capabilities. What is lacking is how to combine the actual situation of their own company with futures. In addition, there are obstacles in the corporate mechanism that need to be further optimized "He Zhensheng told reporters that during the period, the two sides worked together every day, giving full play to their respective advantages and learning from each other. ENN has also learned from Guanghui Energy's experience in using futures to price its products, and at the same time learned about the trading knowledge of varieties other than methanol products.
In fact, in the methanol industry, many upstream companies like Guanghui Energy have made positive changes. The weak cycle of the methanol industry forces companies to start a new game amidst the changing situation.
In He Zhensheng's view, not all companies have made changes in the methanol market, but more and more large companies have met certain conditions. "It needs to be pushed again to let the company break out of the cocoon, and this is also the focus of the 'industrial base' work in 2023. Find the core issues that prevent companies from participating in futures, and coordinate various resources under the empowerment of all parties in the market. Solve the last problem of the enterprise," he said.
"For real enterprises, futures can be icing on the cake and can give charcoal in a timely manner, but they cannot be created out of nothing. Industrial enterprises should give full play to their industrial advantages, combine procurement and sales scenarios, and use the combination of futures and cash to seize market opportunities and create marginal value." He Zhensheng He said that the enterprise should design the futures model based on the current business situation, adhere to the spot business as the basis, only make futures products with spot channels, and achieve corporate goals through "deep self-awareness + market awareness + futures application".
Demonstrate responsibility and achieve win-win development in the weak industry cycle
In the weak cycle of the industry, how to transform and break through and win in danger has also become an important issue for methanol-related enterprises. The reporter learned that in the face of the weak industry cycle, many methanol industry enterprises, especially the "industrial bases", have done a good job of protecting the value of their products, closely integrating the hedging business with the company's production and operation, and achieving a steady increase in the scale of hedging.
It is understood that Xinao insists on long-term hedging, and will explore a combined hedging strategy from 2022, initially establish a virtual factory calculation model, conduct comprehensive profit monitoring, try to lock in the price to lock in the profit, and strive to achieve all-round risk hedging .
"Generally, mainland production factories only carry out selling hedging, which limits the factory's operating space and limits the scale of hedging under the condition of strong futures-current basis and low prices. We comprehensively considered market prices, inventory conditions, and mainland The price difference between current and futures, and the purchase of hedging has improved the continuity of the hedging of production enterprises, and realized the reduction of production and operation costs." He Zhensheng said that, in addition, through the way of combined hedging, ENN Energy has avoided the rise of raw materials. The uncertainty brought to hedging is conducive to expanding the scale.
"In this way, enterprises can also reserve raw materials for production in advance, avoiding the shortage of raw materials caused by logistics delays and tight product supply and demand, and ensuring the stable production of the factory. It also has the opportunity to revitalize the raw material inventory assets and realize the value-added profit of the raw material warehouse." He Zhen holy name.
As an "industrial base", Xin'ao cooperates with upstream, midstream and downstream enterprises in multiple regions to carry out arbitrage and basis trade business. In the weak industry cycle, through mutual guarantee of supply from upstream and downstream, it solves logistics obstacles, product price fluctuations, and corporate operating losses. and other issues, make full use of the mutual advantages of both parties, and serve the real industry to the maximum extent to achieve stable operation when extreme market conditions appear.
Taking the week of June 15, 2022 as an example, the profit of methanol downstream MTBE rose to a record high of nearly 3,000 yuan/ton. A factory in Shandong hopes to sell more MTBE forward delivery orders in July to lock in more profits, but is afraid that the price of raw material methanol will rise in the future, which will cause losses in production.
"The price of methanol on the north line of Inner Mongolia was 2420 yuan / ton that week. We are bearish on the market outlook and hope to lock in the sales price. Because the current Northwest spot and futures price difference is relatively strong, it is most suitable to sell forward spot. The price is 2460 yuan / ton to this customer Supply 5,000 tons of methanol, and the agreed delivery period is July 1-30, 2022. Each has locked the purchase and sales prices, and realized mutual guarantees." He Zhensheng introduced that for this business, Xinneng has locked in a high price. The downside risk is hedged, and the selling price of the product is 40 yuan/ton higher than that of spot selling. For the Shandong MTBE factory, after locking in the cost of raw materials, it dared to increase the pre-sale orders of products in July, and finally gained more profits.
The reporter also observed that after years of growth, the "industrial base" has paid more and more attention to the maintenance and cultivation of customers in the industrial chain. "Every enterprise in the upstream and downstream is an important part of the industry ecology." He Zhensheng said frankly that he hopes to establish a non-game and non-contradictory relationship with the upstream and downstream, so that they can clearly understand each other's needs, and the two sides will grow together win.
"Especially in the current weak industry cycle, we not only hope that we can hedge risks, but also hope that companies in the industry chain can participate directly or indirectly, embed futures and spot business into the daily trade cooperation process, and help companies lock in costs and orders together profits, give full play to their respective advantages, implement strategies together, and achieve a win-win situation.” He Zhensheng said.
After getting in touch, the reporter can clearly feel that at present, for some enterprises that value innovation and change, they very much hope to improve the activity of futures and cash transactions of industrial enterprises through model innovation. On the one hand, when selling products, we can have a richer sales model; on the other hand, we also hope to cultivate professional and reliable participants in the region. Only with more participants can we have the possibility of continuous innovation.
It is worth mentioning that at present, many state-owned enterprises are gearing up to participate in futures, especially some industry leaders. These enterprises have a solid spot foundation, high-quality professionals, and advanced trading concepts. For these companies, it is not only necessary to use futures tools to optimize their own supply chain system and realize risk hedging, but more importantly, it is necessary to help the industry operate steadily and ensure the healthy development of the industry.
JIN DUN CHEMICAL has built a special (meth) acrylic monomer manufacturing base in ZHEJIANG province. This makes sure the stable supply of HEMA, HPMA, HEA, HPA, GMA with high level quality. Our special acrylate monomers are widely used for thermosetting acrylic resins, crosslinkable emulsion polymers, acrylate anaerobic adhesive, two-component acrylate adhesive, solvent acrylate adhesive, emulsion acrylate adhesive, paper finishing agent and painting acrylic resins in adhesive.We have also developed the new and special (meth) acrylic monomers and derivatives. Such as the fluorinated acrylate monomers, It can be widely used in coating leveling agent, paints, inks, photosensitive resins, optical materials, fiber treatment, modifier for plastic or rubber field. We are aiming to be the top supplier in the field of special acrylate monomers, to share our rich experience with better quality products and professional service.
