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Urea Futures Writes a New Chapter in Serving "Sannong" and Helps the Fertilizer Industry
2023/8/18
As the "fat nest" of Henan, Ningling has gathered many enterprises in the urea industry chain. Here, the "fertilizer man" has witnessed the growth and maturity of urea futures. After experiencing the "rooting, blossoming, and fruiting" of urea futures in the industrial chain, they felt the impact of futures on the transformation of the traditional fertilizer industry. On August 17, the 2023 Futures Help Rural Revitalization and "Insurance + Futures" Innovation and Development Conference sponsored by Futures Daily, Shangqiu Financial Work Bureau, and Ningling County People's Government was held in Ningling, Henan. At the sub-session of the new chapter of urea futures writing service "Sannong" undertaken by Zhongyuan Futures and Yuntu Holdings Co., Ltd. (hereinafter referred to as Yuntu Holdings), the guests discussed how financial derivatives can help the steady development of the fertilizer industry, and jointly unveiled the urea futures service A new chapter of "Sannong".
The reporter learned that, as the first chemical fertilizer futures product in China, urea futures were listed on the ZCE on August 9, 2019. Over the past four years, the overall operation of urea futures has been stable, the linkage with spot prices has gradually increased, the structure of market participants has been continuously optimized, delivery has been smooth and orderly, and the breadth and depth of the service industry have continued to increase. It plays an active role in national fertilizer reserves and food security.
The reporter learned at the meeting that in recent years, ZCE has met the market demand of industrial enterprises and improved the industry by continuously optimizing the delivery layout of urea futures, holding industrial conferences, giving play to the demonstration and driving role of "industrial bases", and adopting measures such as reducing fees and making profits. The awareness and level of risk management of enterprises using urea futures facilitates more enterprises to participate in the futures market. At present, more than 2,000 industrial enterprises have opened accounts and participated in urea futures trading, covering the entire industrial chain of production, trade and consumption.
The data shows that in 2022, customer positions in the urea industry will account for 32.1%, an increase of 11.5 percentage points year-on-year. Since the beginning of this year, the average daily turnover and positions of urea futures have been 355,200 lots and 475,200 lots respectively, an increase of 323.87% and 225.17% year-on-year; the average daily positions of legal persons accounted for 69.7%, an increase of nearly 9 percentage points from last year. It has become a trend for enterprises to participate directly or indirectly in the urea futures market for risk management.
Over the past four years, urea industry companies have gradually deepened their understanding of futures, and most traders have also participated. "Great changes have taken place in the entire industry in the past few years, and the pace of urea price fluctuations is getting faster and faster. Especially for enterprises that undertake national chemical fertilizer commercial reserves, the 'dual-track parallel operation' of spot and futures is indispensable." Zhongnong Group Holdings Co., Ltd. Li Xiang, head of the company's futures business department, said that urea industry companies have not only completed the storage task, but also can reduce operating risks. This is the empowerment of urea futures for storage companies.
In this regard, Wang Rui, general manager of the investment and research department of Yuntu Holdings Futures Center, also said that as the "grain" of grain, the two core functions of urea futures, price discovery and risk avoidance, can consolidate the chemical fertilizer industry chain.
"Upstream manufacturers rationally use the futures market to avoid the risk of product price declines, better enhance product competitiveness, and thus protect the supply side. Midstream traders use the futures market to stabilize the supply chain while avoiding operational risks. The downstream demand side gets A tool for discovering prices, so as to achieve the purpose of reducing costs, increasing profits and enhancing service added value." In Wang Rui's view, after the upstream and downstream of the entire chemical fertilizer industry chain make full use of futures tools to lock in processing profits, the resilience of the chemical fertilizer industry chain can be improved. Provide solid support for the national strategy of storing grain on the ground.
It is understood that upstream and downstream enterprises in the urea industry chain are more and more accepting of futures, and their participation is also increasing. Some leading enterprises are promoting the transformation of industrial trade models and pricing models.
According to the open introduction of the history of futures and current managers of the Second Department of Zhejiang Hangshi Chemical Energy and Chemical Industry, on the basis of conventional trade, enterprises can carry out forward and reverse operations according to the characteristics of the basis. The current market is accelerating development, and the emergence of forward paper goods has brought new development opportunities, linking up spot and futures, and the cooperation of the three can better provide hedging opportunities for industrial enterprises in need, and provide a basis for price point methods. Change provides an opportunity.
"The futures market accelerates the flow of information between industries, which helps industrial companies understand the industrial structure and details more clearly, and facilitates companies to make targeted countermeasures." Shi Kaikai said.
"At present, urea traders participate in the futures market to a relatively high degree. As a link connecting the upstream and downstream of the industry, traders undertake relatively high market risks, and there is also a greater demand for risk avoidance." Mao, director of the chemical business department of Yuxin Investment Runze said that from the simple use of futures for value hedging at the beginning, to the later basis trade, and now to the use of more complex options to hedge the risk of price fluctuations, the use of futures tools by enterprises has become more and more mature.
What Mao Runze felt the most was that in the process of continuous learning and use of futures by urea enterprises, futures companies, risk companies, and futures and spot traders are all sincerely providing services and support for the enterprises.
The reporter learned that, as the first chemical fertilizer futures product in China, urea futures were listed on the ZCE on August 9, 2019. Over the past four years, the overall operation of urea futures has been stable, the linkage with spot prices has gradually increased, the structure of market participants has been continuously optimized, delivery has been smooth and orderly, and the breadth and depth of the service industry have continued to increase. It plays an active role in national fertilizer reserves and food security.
The reporter learned at the meeting that in recent years, ZCE has met the market demand of industrial enterprises and improved the industry by continuously optimizing the delivery layout of urea futures, holding industrial conferences, giving play to the demonstration and driving role of "industrial bases", and adopting measures such as reducing fees and making profits. The awareness and level of risk management of enterprises using urea futures facilitates more enterprises to participate in the futures market. At present, more than 2,000 industrial enterprises have opened accounts and participated in urea futures trading, covering the entire industrial chain of production, trade and consumption.
The data shows that in 2022, customer positions in the urea industry will account for 32.1%, an increase of 11.5 percentage points year-on-year. Since the beginning of this year, the average daily turnover and positions of urea futures have been 355,200 lots and 475,200 lots respectively, an increase of 323.87% and 225.17% year-on-year; the average daily positions of legal persons accounted for 69.7%, an increase of nearly 9 percentage points from last year. It has become a trend for enterprises to participate directly or indirectly in the urea futures market for risk management.
Over the past four years, urea industry companies have gradually deepened their understanding of futures, and most traders have also participated. "Great changes have taken place in the entire industry in the past few years, and the pace of urea price fluctuations is getting faster and faster. Especially for enterprises that undertake national chemical fertilizer commercial reserves, the 'dual-track parallel operation' of spot and futures is indispensable." Zhongnong Group Holdings Co., Ltd. Li Xiang, head of the company's futures business department, said that urea industry companies have not only completed the storage task, but also can reduce operating risks. This is the empowerment of urea futures for storage companies.
In this regard, Wang Rui, general manager of the investment and research department of Yuntu Holdings Futures Center, also said that as the "grain" of grain, the two core functions of urea futures, price discovery and risk avoidance, can consolidate the chemical fertilizer industry chain.
"Upstream manufacturers rationally use the futures market to avoid the risk of product price declines, better enhance product competitiveness, and thus protect the supply side. Midstream traders use the futures market to stabilize the supply chain while avoiding operational risks. The downstream demand side gets A tool for discovering prices, so as to achieve the purpose of reducing costs, increasing profits and enhancing service added value." In Wang Rui's view, after the upstream and downstream of the entire chemical fertilizer industry chain make full use of futures tools to lock in processing profits, the resilience of the chemical fertilizer industry chain can be improved. Provide solid support for the national strategy of storing grain on the ground.
It is understood that upstream and downstream enterprises in the urea industry chain are more and more accepting of futures, and their participation is also increasing. Some leading enterprises are promoting the transformation of industrial trade models and pricing models.
According to the open introduction of the history of futures and current managers of the Second Department of Zhejiang Hangshi Chemical Energy and Chemical Industry, on the basis of conventional trade, enterprises can carry out forward and reverse operations according to the characteristics of the basis. The current market is accelerating development, and the emergence of forward paper goods has brought new development opportunities, linking up spot and futures, and the cooperation of the three can better provide hedging opportunities for industrial enterprises in need, and provide a basis for price point methods. Change provides an opportunity.
"The futures market accelerates the flow of information between industries, which helps industrial companies understand the industrial structure and details more clearly, and facilitates companies to make targeted countermeasures." Shi Kaikai said.
"At present, urea traders participate in the futures market to a relatively high degree. As a link connecting the upstream and downstream of the industry, traders undertake relatively high market risks, and there is also a greater demand for risk avoidance." Mao, director of the chemical business department of Yuxin Investment Runze said that from the simple use of futures for value hedging at the beginning, to the later basis trade, and now to the use of more complex options to hedge the risk of price fluctuations, the use of futures tools by enterprises has become more and more mature.
What Mao Runze felt the most was that in the process of continuous learning and use of futures by urea enterprises, futures companies, risk companies, and futures and spot traders are all sincerely providing services and support for the enterprises.
"Futures companies promote and introduce futures instruments, risk companies introduce basis trade and options, futures and spot traders enter the urea market, and promote basis trade on a large scale." In his view, every role in the market is fully utilized With their respective functions, they help urea industry companies understand futures tools, help companies participate in the futures market, and enable companies to rationally use futures tools to avoid risks and better enjoy the "benefits" that derivatives bring to the industry.
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