CMRA 2014: Coping with risk

Several presenters at the 2014 convention of the China Nonferrous Metals Association Recycling Metal Branch (CMRA) pointed to risks in the current market but also presented suggested solutions.

 

Yang Yinghui, managing director and head of metals and chemical markets at Beijing-based COFCO Futures Co. Ltd. presented hedging as an important risk mitigation tool available to both producers and recyclers of nonferrous metals in China.

 

Companies and trading offices “need to know the risk exposure connected to your link on the supply chain,” said Yang. She pointed to the inventory management, procurement and sales processes each as ones where price volatility can cause harmful effects.

 

Forward-thinking companies in China “have already started using hedging,” stated Yang. “I think you should be sober-minded,” she cautioned nonferrous metals buyers and sellers, urging them to avoid price speculation. “You need to be aware of the risks.”

 

Since many small- and medium-sized enterprises “don’t have in-house professionals to manage risks,” according to Yang, she urged them to turn to a third-party futures provider such as COFCO for help.

 

In a separate presentation, Zhu Wuxiang of the Tsinghua University [http://www.tsinghua.edu.cn/publish/newthuen/] School of Economics and Management urged CMRA delegates to step back and reconsider their business models and strategies and to be prepared to innovate.

 

The Beijing-based professor said business owners are faced with considering new methods of financing and engaging in research, among many other choices. “In the distant past there was only route to travel from Beijing to Guangzhou; now there are many options,” he commented.

 

He said Chinese companies have been urged to put 7 percent of their budget into R&D, but this alone “does not guarantee good research or the development of products that people want. You spend the money without the benefits.” He pointed to companies like IBM and Procter & Gamble working with venture capitalists to seek out R&D project candidates or using Internet open platform research forums as alternatives.

 

Regarding the current lending climate in China, he said small and medium enterprises “cannot rely only on banks” and expressed optimism that venture capital funding can grow in China.

 

Recyclers in China who can move to approved industrial parks may help mitigate others risk in the form of greater cooperation with local governments and reduce the risk of being forced to move because of new development projects. 

 

CMRA Vice President Shang Fushan noted that China’s central government has approved 45 “urban mining parks” for the recycling of end-of-life vehicles, appliances, electronic scrap and other forms of recycling.

 

The 2014 CMRA Annual Convention was at the Dongfang Hotel in Guangzhou, China, Nov. 7-9.