Chapter 549 Hedging Business Risks

"We have just started to make contact. In January next year, Whirlpool will send people to Hong Kong. They will conduct a systematic investigation of Hong Kong before deciding whether to invest in Hong Kong." Wang Zhiqun replied: "Such large American companies are often very inefficient."

Yang Wendong nodded and said, "Then let's follow the process. The impact of the American white goods industry on Japanese counterparts is not as great as that of color TVs. It's normal that there is no rush, unlike RCA."

One of the major factors affecting international competition is transportation. Nowadays, Japanese products exported to the United States are mainly produced in Japan and then shipped by sea. In this way, the transportation cost of color TVs with small size and high unit value is naturally more cost-effective.
Even Samsung in its original history started out by exporting black-and-white televisions;
However, as containers become more and more popular, the transportation costs of white goods are gradually decreasing. The good days for American home appliance companies are finally coming.

Wang Zhiqun went on to say: "I am also negotiating with York and General Electric in the United States so as not to put all my eggs in one basket. It would be even better if they could all come to Hong Kong to invest."

"How did you get in touch with these big companies? Is it all thanks to Rongyao motors?" Yang Wendong asked again.

Wang Zhiqun said: "It's not all about the motor, there are some other parts, but the motor does play a major role. The labor cost in the United States is high, and the motor winding and the correction after winding are very labor-intensive.
Our fans started to sell very well in the United States in the early years, so it was easy to connect with many major appliance companies in the United States through motors. They also have their own fan business. In addition, there are many motors in refrigerators, air conditioners and even some kitchen appliances. "

"What was the quantity and value of motor exports last year?" Yang Wendong asked.

Wang Zhiqun replied: "A total of 1300 million motors were exported, with a total value of more than 2800 million Hong Kong dollars. Some were large and some were small. The small ones were worth a few cents, and the large ones were worth dozens of dollars."

Yang Wendong smiled and said, "Then this industry is developing quite well. Is this factory nearby?"

"Yes, it's nearby." said Wang Zhiqun.

"Okay, you go and take a look too." Yang Wendong said.

The RCA joint venture factory is mainly under the responsibility of the US side. You just need to come and take a look, calculate the accounts, conduct environmental inspections, etc. The US side will not even tell the Hong Kong side the core data, so Yang Wendong will naturally not force it.

Relatively speaking, it will be easier to layout your own home appliance industry and white goods.

The group soon arrived at another factory not far away, where a large number of people were producing motors of different sizes. There were dozens of production lines, and large amounts of copper wire were being wound into the stators and rotors of the motors through semi-automatic equipment.

"We must have consumed a lot of copper this year, right?" Yang Wendong asked, "I remember there was also an electric wire factory?"

Wang Zhiqun replied: "Yes, the copper consumption of the wire factory is actually higher than here, especially for some thicker cables. In addition, we also do very well in the extension board business, and we export a lot.

Now I import copper ingots directly from South America and the United States, which is almost several thousand tons a year. However, there are also copper products recycled and smelted in Hong Kong, which can save a lot of money. "Copper is indeed easier to recycle." Yang Wendong nodded and asked, "Is there copper export in the mainland? I remember that there should be a lot of copper mines in the mainland, right?"

Wang Zhiqun said: "There should be a lot of copper mines in China, but there is a shortage of copper itself, so there is basically no export. A few years ago, some copper from the mainland occasionally flowed into the Hong Kong market, but in recent years, there has been no such flow.
Hong Kong's copper is mainly imported from overseas. The electronics industry has developed rapidly in recent years, and the demand for copper is also very high."

"In this way, we can spend more money to buy copper ingots in the next few years and stockpile copper ingots." Yang Wendong thought for a while and said, "According to the current economic development speed in Asia, the price of copper may get higher and higher in the future."

The development of Asia is one aspect, but the main reason is the upcoming oil crisis, which has caused a surge in the prices of heavy metals, including copper.

If I didn't have a copper industry, I wouldn't have to hoard copper specifically, but now that I have it, I naturally need to make preparations early;
Not only can you make money from the price difference, but as long as you have enough copper, you can also gain more customers in times of crisis, which is a more long-term business.

"Hoarding copper?" Wang Zhiqun thought for a moment and asked, "Mr. Yang, how about we invest in copper mines? It doesn't mean we open mines ourselves, but we buy stocks of these companies. If the price of copper really goes up, we can't hoard the amount we will need in the future. It is more cost-effective to buy stocks of these companies."

Yang Wendong agreed and said, "That makes sense. Then you should first investigate which professional copper mining companies are around the world. You can invest appropriately, and you don't need to consider how many shares you have. Just treat it as a hedge for our future operations."

In many cases, you need to hedge when doing business. For example, if a steel mill has money, it has to buy shares of some mines or iron ore companies. Otherwise, if the price of iron ore skyrocketed one day, the steel mill would suffer heavy losses. If it buys shares of some ore companies, at least the shares can benefit.
The same reason why new energy vehicle companies concentrated their investments in lithium mines in the past was also true.

When faced with some industries that time travelers cannot provide much resource help, they can only follow normal business processes. If the demand for copper is high and they know that copper prices will skyrocket in the future, they should implement risk hedging operations to avoid heavy losses due to the skyrocketing commodity prices.

"Okay, but wouldn't it be more reasonable to let Changxing Finance handle this?" said Wang Zhiqun.

Honor Electronics' main business is still industry. If it involves mining, they can still participate reluctantly, but if it involves buying stocks, that is not something they should touch.

Yang Wendong nodded and said, "Okay, Fang Xianming and I are planning to go to the United States, and we will also check the situation of American copper mines."

In the 1960s and 1970s, the United States still had a large number of industries. With the high cost of ocean transportation, there were many mining companies in the United States, ranging from basic energy such as oil, coal, and natural gas to iron, copper, gold, silver, aluminum, and even rare earths.

However, with the promotion of globalization, these enterprises are gradually failing;

Of course, this does not work well in the sense that decades later, it was still very popular during the two recent oil crises. The oil crises even indirectly eased the pressure on this type of manufacturing industry in the United States, except for cars with very high fuel consumption.

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(End of this chapter)

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