The recent hedging operations of a certain lithium mining company have attracted quite a bit of attention. The company's short positions in the futures market have raised a question worth discussing: what truly constitutes hedging, and when does it turn into speculation?

It is understood that this company produces lithium carbonate from lithium mica, with a production cost of about 90,000 yuan per ton. According to the logic of proper hedging, the short position price in the futures market should not be lower than 95,000 yuan per ton. Moreover, this figure is based on a premise — your hedging volume must match your actual production capacity and should not exceed the average output.

But reality is often more painful. When a manufacturing company is shorting below its cost price, it is no longer hedging; frankly, it is betting on the market direction. Production capacity and risk management are in place, yet they still gamble on futures prices. Such operations are indeed a bit speechless.