On November 27th, pulp futures will be officially launched on the Shanghai Stock Exchange, which has attracted much attention from the industry.
Because as the first futures product in China's paper industry, pulp futures will undoubtedly become a risk hedging tool for the pulp market. With this tool, the pulp-based commodity spot market operators can achieve the purpose of locking in costs and locking in gains through the linkage operation of futures and spot. This will play a positive role in avoiding the risk of spot price fluctuations and restraining market price fluctuations. It is the most powerful risk aversion tool in the pulp market.
In addition, there are many waste paper spot market players discussing the feasibility of spot risk hedging between pulp futures and waste paper products. Although pulp has theoretical one-way alternative to waste paper, can pulp futures be used as waste paper spot market? The risk hedging tool? The following will analyze the correlation between the two price trends.
It can be seen from the figure that since 2015, the price of coniferous pulp (the standard of pulp futures) and the price of national waste yellow paper have been similar, and the correlation analysis between the two consecutive daily price data can be obtained:
It can be seen from the table that the correlation coefficient of the daily average price of the A-grade spot of the softwood and the waste yellow paper in November 2015-2018 is as high as 0.90. The high correlation between the two can meet the requirement of risk hedging.
However, a closer look at the map reveals that the price movements of both countries are highly correlated in all years. For example, in the first half of 2018, the two trends showed a typical deviation.
Then, the correlation analysis of the daily average price of the A-grade spot of the softwood paper and the waste yellow paper is carried out in the following year. The results are as follows:
It can be seen from the above data that the correlation coefficients of the spot price trends of the two countries in 2016 and 2017 are 0.86 and 0.77 respectively, while the correlation coefficients of the two in 2015 and 2018 are -0.26 and -0.51. In the four consecutive years, the correlation coefficient between the grades of the softwood and the grade A of the waste yellow paper is very different. From this point of view, the use of pulp futures as a risk hedging tool for the scrap yellow paper spot market lacks historical data support. In addition, because the waste yellow paper is highly correlated with the price trend of downstream finished paper, it is difficult for pulp futures to become a risk hedging tool for box corrugated paper and whiteboard paper.
The reason for the large difference in the correlation coefficient between the grades of softwood and scrap yellow paper A grades is discussed here.
2015 is the year in which the external policy impact of the paper market has subsided. The spot price fluctuations of pulp and waste paper mainly follow the commodity attributes. In 2018, the impact of the external policy of waste paper is intensified, so the negative correlation between the price of pulp and waste paper is more obvious. Because the target of policy influence is waste paper, the sensitivity of the pulp market to the policy impact imposed on the waste paper market is significantly weakened, and the conductivity between the two prices is also poor. The year 2016-2017 is the year in which external policies occurred and spread. The prices of the two countries entered the rising channel simultaneously from the low level, so the correlation was higher.
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