Fujian’s first “mask option” launched
Since the outbreak of the new coronavirus pneumonia, due to the demand for epidemic prevention and control, the demand for masks has increased rapidly, and masks have become one of the most scarce protective supplies on the market. A “mask” is hard to find, and masks with medical protection standards are even more scarce. The raw material of medical masks is mainly polypropylene, and the price fluctuates greatly. Manufacturing companies are faced with raw material price risks.
In response to Fujian Province’s call to fight the epidemic, on January 23, 2020, Xiamen MeirunNonwovens Co., Ltd., which was already on holiday, formulated an emergency plan to arrange for the Spring Festival During this period, we worked overtime to produce masks. Currently, Xiamen Meirun can produce 500,000-1 million masks a day. For Xiamen Meirun, the rising price of polypropylene, the main raw material for its products, has a greater impact on the company’s production costs. The company’s raw material inventory is currently relatively tight, and it faces the risk of declining profitability due to rising polypropylene prices.
After learning of this situation, Industrial Securities Risk Management Co., Ltd., a wholly-owned subsidiary of Industrial Securities Futures, actively responded to the call of China Financial Association to fight the epidemic, gave full play to its professional advantages, and worked with Industrial Securities Xiamen Branch to tailor-make Xiamen Meirun It also provided a PP2005 at-the-money Asian call option with an exercise price of 7,038 yuan/ton for free, with a scale of 300 tons, which is equivalent to ensuring the raw material cost of more than 40 million masks.
This OTC option can be understood as an insurance. When the purchase price exceeds the agreed standard (i.e., the exercise price), Industrial Securities Risk Management will pay compensation; when the purchase price is lower than the agreed standard (i.e., the exercise price) , the company itself did not suffer any losses, and the drop in raw material prices also allowed the company to reduce production costs and stabilize production expectations.
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