Read: where does the price risk come from when low coal prices and market noises make it necessary for enterprises to take risk-free trading instruments such as futures? There is a need for in-depth empirical research。
In the wake of the 2008 global financial crisis, the government unexpectedly adopted an extraordinary monetary stimulus package of $4 trillion plus three years of credit of $2. 6 trillion, which resulted in the explosive growth of industries such as high-energy, high-polluting steel, cement and electrolytic aluminium, while creating excessive demand for coal, pushing coal prices to over $1,000 per ton at the peak of 550 kilocalories/kg of powered coal in 2011 and further stimulating the crazy growth of coal capacity。
While the monetary policy of the current administration has been transformed into a heavy-watered monetary policy of the previous administration, with a targeted currency drop strategy, the problems of overcapacity and the lack of liquidity for smes have not been effectively addressed, much less deterring the movement of the national economy from double-digit growth to 7. 5 per cent。
In doing so, the coal industry is also faced with the combined effects of the overall economic downturn on declining coal demand and overcapacity. Even more brutal, coal prices have fallen so far to less than $480 per ton, putting many coal mining enterprises in a position to run at a loss. China's coal market is objectively at the top of global risk
In order to reduce the risk of large price fluctuations on businesses such as coal, on 26 september 2013, the zhengzhou commodity exchange (hereinafter zheng zheng zhong zhong zhong zhong zhong) launched a futures contract of 5,500 kilocalories/kg of powered coal in an attempt to provide domestic firms with a coal hedging trading tool to enable them to have a safe haven. Since the contract landed, however, coal prices have continued to decline along the lines of inertia, and the volume of the deal has gradually begun to widen, while at the same time posing significant trading risks to many of the traders。
Is the coal market in china saved
Look for the rock of its mountain
The united states chicago exchange group (cme), which relies on the dollar's position as an international reserve currency and its nearly 100-year-old advanced trading tools, systems, rules, regulations and innovative capabilities, provides operators with a global risk-averse trading tool, reaching out to all key partners and competitors in countries and markets. Among them, the coal market has covered countries such as europe, south africa, australia, china and indonesia. In the united states, it has also provided relatively well-developed risk avoidance trading tools for a wide range of traders through tool innovation。
At present, the new york commodity exchange (nymex), under the cme umbrella, has launched the most influential coal futures contract for the north american coal industry (the qld code) that trades coal from the appalachian coal fields, and, in order to avoid the operational risks of a single futures contract that is unable to avoid a mispriced price movement, has introduced three options for its innovation, the c1, 6k, 6m and so on, giving participants in need of protection more choice。
In order to address the investment needs of off-site market (otc) traders, nymex also launched a financial-indexed futures contract for coal-cutting on the east and west railways (trading codes qx and qp) and a corresponding option contract to protect them from risk, allowing financial capital to safely and smoothly establish an off-the-shelf, domestic-global price link between the united states and the real industry, while also providing opportunities for investors or speculators to profit and avoid risk。
In order to further avoid the risk of dealing, these contracts consistently set contractual trading units at 1,000 or 1550 tons per hand, crowd out small and medium-sized speculators with low risk resistance and reduce market noise (compared to 200 tons per hand for coal futures that zheng has powered), thus becoming the world's most important market for coal avoidance and asset allocation。
Looking for market omissions
When chinese officials are also able to price the domestic coal market and to reconcile prices and interests among coal mines, power plants, and grid companies, with a sense of complacency (in practice there has been an alarming problem of corruption), americans have made institutional arrangements and tool innovations for the need for risk avoidance when their businesses participate in the chinese market. Among these, nymex has designed future contracts specifically for the 5,500 kilocalories/kg of coal that were used in china’s coal trade negotiations, creating a trading unit of 1,000 tons per hand, at a cost plus freight (argus/mclowski) to be shipped to china’s financial coal futures contracts。
In a comparative study of the relationship between the prices of the coal flagship contracts in the two markets of china and the united states, it was found that the price movement of the coal futures (tc1409), which had been driven by the market for more than nine months, could be influenced by united states financial capital (pricing)。
As can be seen in figure 1, the western railway of the united states has an indexed futures contract (trad code qp) transaction price ahead of its physical flagship contract (trad code qld) for nine trading days and a correlation factor of 0. 866. In other words, the u. S. Coal finance index futures is the leading indicator for the running of its physical flagship futures contract prices。
As can be seen in figure 2, the price of the physical flagship contract (qld) is ahead of the united states-set ssi, china coal futures contract, for eight trading days, with a correlation factor of -0. 825. That is to say, the united states coal demand market, contrary to china's coal market cycle, is not only highly relevant, but also has a pioneering role. On the other hand, the united states is steadily emerging from the economic crisis since 2008, and despite its “shale gas revolution”, it remains dependent on coal。
As can be seen in figure 3, the china china coal futures contract (ssi) in the united states is also highly relevant to the price trends of the power coal futures contract (e. G., trade code tc1409) set by zheng chang, and the correlation coefficient for synchronization is as high as 0. 914。
In terms of the flow of international financial capital and price trajectories, the us-china coal price relationship is transmitted from u. S. Financial instruments (qp) (in a broad sense of asset allocation, contracts for commodity futures, options, etc. Can be referred to as instruments) to physical instruments (qld), from physical instruments (qld) to financial instruments (ssi) and from financial instruments (ssi) to chinese physical instruments (tc1409). The initial recognition of this price transfer mechanism is equally supported by the relevance study of the conductivity process。
Although this empirical study, which is used to prove the us-china coal price transfer mechanism, has only been available for more than nine months, or has not been long enough, or the amount of data is insufficient, the price results of the us financial capital's asset allocation on its coal financial instruments have been reflected in the price movement of china's coal flagship futures contracts after three trading weeks, and whether or not it is accepted that the transmission mechanism and the close relationship have played a role, it seems somewhat hasty to say that the immediate conclusion of such a referral mechanism is that us financial capital is behind the covert manipulation of china's domestic coal prices。
At the time of writing, however, at the operational level, the mechanism would operate as a domestic warehouse, with over 90 per cent of the profit-making opportunities available, and investment would indeed generate a windfall. In the absence of an understanding of what is inside such a mechanism, a single risk avoidance tool, such as powered coal futures, and an enterprise undertaking risk avoidance or asset allocation would bear the full market hedge risk. So, the futures market for goods like chinese coal is both profitable and risky
As a result of the constant intervention of the relevant government authorities in commodity prices, which distorts the prices of spot markets, deprives futures markets of the functionality and significance of price discovery, resulting in futures contracts being either over-specified or dormant or unworkable, and the lack of a relatively closed system of risk avoidance tools in domestic futures markets, which increases the power coal risk exposures, thereby depriving futures markets of their proper risk avoidance and asset allocation functions, they have become the pain of the chinese market。
Responsible editor: zhang dei
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