Chapter 754 Investment in the Steel Industry

Chapter 754 Investment in the Steel Industry

Chapter 754 Investment in the Steel Industry

The opening of the Suez Canal marked the end of the golden age of shipping companies. Throughout the 80s, prices in the shipping market were not very good. There was another reason for this: more and more companies were able to build ships around the world, especially in Asia.
Until the 90s, Asia's economic development was booming, driving the demand of billions of people. Southeast Asia is made up of island countries, and logistics rely on shipping. At the same time, after the third oil crisis, the United States completely controlled oil, causing oil prices to fall. This not only led to a surge in oil transportation volume, but the low cost of oil also led to a reduction in various transportation costs.

But even so, the shipping in the 90s was not as good as the wave from 67 to 74, and it was even far behind. It can be said that there will be peaks in the shipping era in the future, but there will never be such a golden opportunity again;
Compared with the booming real estate market in Hong Kong, it is far behind, and even cannot compare with the real estate markets in some Southeast Asian countries;
However, as the foundation of global trade, and each ship order can affect the employment of tens of thousands of people, Yang Wendong is still prepared to continue to run the shipping industry seriously. He knows the peaks and troughs, and can make considerable profits from it. For example, the best time to expand the fleet is actually the 80s, because during this period, shipbuilding companies in Japan and Taiwan almost stopped working.

It is still early now, so it is enough to maintain the current scale for the time being. Serious development in the container field can also promote the demand for containers, killing two birds with one stone.
After the two men left, Yang Wendong brought Wei Zetao from Changxing Industrial to Kwai Chung. Not far away, a large number of containers were piled up into small hills, preparing to go out to sea.

"Hong Kong's export trade is really good." Yang Wendong rarely sees such a scene.

Wei Zetao replied: "Yes, in the past six months, the overseas economy has gradually recovered from the oil crisis, and overseas orders have gradually increased. The factories in Hong Kong have also become busy. Our container terminals are naturally busy as well. Even the containers I have on hand are beginning to run out of time to produce. Now we are preparing to build a fourth branch factory."

Yang Wendong nodded and said, "Well, we must take good control of the container business. This market will be almost infinite in the future. The foundation of global trade requires containers. As long as you do this well, Changxing Industry can become a global company with this project."

Wei Zetao also agreed: "Yes, many of our group's products are about to expire their patents. Sticky notes, suitcases, and hooks are basically competing with many companies around the world."

"Well, the validity period of a patent is indeed not as long as that of a copyright." Yang Wendong also felt it was a pity and said, "But we already have the advantages of scale and channels. Even if we cannot monopolize the market, we can still control a certain market share.

However, the core of Changxing Industry in the future is to seriously do a good job in the supply chain. As long as this part is strong, the cost of the end product will be low, and we can also supply others."

In the early years, Changxing Industrial was founded on some of Yang Wendong's previous small ideas, but there were not many such ideas, and few of them could be developed on a large scale. By the end of the 60s, there were basically no new things.
Changxing Industrial's development plan has also shifted from creative to professional and large-scale development, developing in the fields of papermaking, paper products, plastic products, glue, containers, etc. Although these are not considered high-tech, the market demand is sufficient and there are unlimited possibilities, especially containers, which have only just begun to be developed and it is still a long way to go before there is an oversupply in the global market.

"I understand." Wei Zetao continued, "In terms of plastic products, we are already the largest company in Southeast Asia. The Formosa Plastics Corporation that you invested in earlier has become the largest plastics manufacturer in Asia. Together, we can definitely keep costs to a minimum, so our costs for plastic products such as suitcases are still very low.

In the papermaking sector, our factories in Malaysia, Taiwan and Singapore have fully utilized local forestry resources. Especially in Malaysia, the scale of the papermaking industry is among the best in Asia, and the purchase volume from Europe and the United States is also increasing. I am also planning to continue to invest in new paper mills in Malaysia to expand production scale.

The only problem is that although we have a high demand for containers, Hong Kong does not have a steelmaking industry. Our steel ingots are all imported from overseas, so the cost of this area cannot be reduced. Fortunately, there is a high demand for containers, and Hong Kong has cheap labor and a good location, so there is no impact for the time being. But in the long run, this issue still needs to be taken seriously.”

"Steel? I remember there are several steel mills in Hong Kong, right?" Yang Wendong asked.

In the past, many people in the mainland felt that steel was very cheap, and some steel products were not expensive either, but these were actually the results of the world's largest industrial country; with an annual steel output of more than one billion tons, steel became very cheap.

But in this era, the price of steel is still very expensive, and steel mills are still a highly profitable industry and a core industry in many developed countries.

In other words, the price of the purchased steel is far from its actual cost, which is completely different from the mainland in the previous life.

Wei Zetao shook his head and said, "These small steel mills are all engaged in recycling and smelting scrap steel. The quality is not good. Not to mention our containers, even some of Hong Kong's manufacturing and construction industries cannot use this kind of steel. These steels can only be used for some construction scraps."

After listening to him, Yang Wendong asked again, "You don't want to build a steel production line in Hong Kong? Steelmaking?"

Wei Zetao shook his head and said, "Not in Hong Kong, but in Taiwan. Hong Kong lacks water and sometimes electricity, so steelmaking is definitely not possible, but Taiwan can. We can build a small steel plant in Taiwan, make steel ingots ourselves, and then ship them to Hong Kong. In this way, the cost will definitely be reduced a lot.
Our group produces more than 100,000 containers a year. Including waste materials, we need 400,000 to 500,000 tons of steel a year. Other industries in Hong Kong also need enough steel. The total demand is one million tons, which is enough to build a steel plant."

"Isn't the steel for the construction industry mainly produced domestically?" Yang Wendong asked again.

"Yes, it is mainly provided by China Resources. Mr. Yang, don't you want to compete with domestic companies?" Wei Zetao asked carefully. This topic is indeed sensitive.

Yang Wendong shook his head and said, "That's not the case. I just want to get to know you first. Have you sent anyone to investigate in Taiwan?"

Wei Zetao said: "I've been there, I think Kaohsiung is a good place, Kaohsiung itself has its own large steel plant, all kinds of supporting facilities, there are steel plants nearby, the demand is also large, the port is also relatively complete;

If our steel plant is built there, we won’t need specialized ships for transportation in the future. We can just have a small boat of several thousand tons to go back and forth, just like Watsons. This will reduce transportation costs a lot.”

"Investing in a steel plant is not cheap. What's the budget?" Yang Wendong asked.

In this era, steel mills still have a very high technological content. The fact that the mainland invested $80 billion in Baosteel in the past is enough to prove this, although there are also some other factors involved.
Wei Zetao replied: “The steel plant over in Taiwan produces 150 million tons of steel annually, with a total investment of US$12 billion, including coking, sintering, blast furnace, converter, and steel rolling;
My idea is that we first invest in a steel plant with an annual output of 30 tons, which would cost $2.4 million in proportion;
However, because there are well-established steel mills in Kaohsiung City, we can choose not to do many industries in the early stage. For example, we can start by only doing steel rolling, and buy raw materials from the Taiwan Steel Mill. When this factory is profitable, we can move forward step by step. "It's hundreds of millions of dollars at every turn, it's really "Yang Wendong shook his head helplessly;

The investment in heavy industry is so huge that even he today finds it a little unbearable. If these hundreds of millions of dollars are invested in the Hong Kong real estate market, they can become tens or even hundreds of billions in the next few decades.

Wei Zetao continued, “Mr. Yang, it looks like hundreds of millions of dollars, but according to my plan, the first phase only requires 6000 million dollars, and most of the funds can also be obtained from banks, so the initial capital can be obtained by our Changxing Industrial Container Branch;
Although the investment is huge, from a long-term perspective, if we want to expand and strengthen the container industry, we must build our own steel mills. Otherwise, most of the profits will be taken away by the steel mills. In addition, many steel mills in other parts of the world also make their own containers. The technical content is not high. We have no advantage in competing with them with a complete industrial chain."

The technical content of containers is actually not low, but for a large steel plant, it is not difficult to make it.

Yang Wendong thought for a moment and asked, "Well, what you said makes sense. We should still invest."

The improvement of the industrial chain is the foundation of long-term operation. In the past, many companies were able to survive for decades or even hundreds of years because they began to develop the front-end industrial chain after achieving some success in the early days.

If you are a car manufacturer, you only need to make the three major parts and will not be involved in the steel industry. However, for the container industry, the core supply is steel. In this era when steel is expensive, it is not feasible to rely entirely on procurement and imports. It will be very dangerous when the market enters the inventory era in the future.

Wei Zetao smiled and said, "I have already made an investment budget. Mr. Yang can come to your office to take a look later."

"Well, OK." Yang Wendong asked again: "Have you considered other factors? After the establishment of diplomatic relations between China and the United States, Taiwan has a bit..."

After the establishment of diplomatic relations between China and the United States, many countries around the world established diplomatic relations with the mainland. The price of establishing diplomatic relations with the mainland is naturally
There are no big problems at this time, but after the mainland’s reform and opening up, Hong Kong’s business and entertainment industries will become the focus of competition between the two sides.

Wei Zetao replied: "I have considered it, so I plan to attract some more American capital, such as your friend Buffett. Even if there is only a little American capital, or European capital, it should be much safer."

"Buffett can indeed do it, but since we have introduced American capital, why not consider introducing capital from the American steel industry? This way we can also obtain some technology, wouldn't that be better?" Yang Wendong asked in return.

During this era, American steel companies were still very strong. Although they were beaten badly by Japan and needed the US government to introduce protection policies, that was also because of the competitive spirit of Japan, which led to low costs and made it easy to seize the market. In terms of technology, American steel was still very powerful.

Wei Zetao said: "I have thought about this, but I don't know any American steel mills, and if I introduce such shareholders, I am afraid that they will become the host, which will be troublesome."

"American steel mill? I don't think I know any of them. How about this, I will call Buffett tonight. He should know some of them. Let him introduce them to me." Yang Wendong thought for a moment and said, "Don't worry about us becoming the host. We just need to give them some shares and buy some technology."

"Or maybe they have some second-hand equipment that is not too old. As long as it can be used, it will also reduce our costs." Wei Zetao suddenly said;

He also knew that the investment was too big, and the boss was a little hesitant. It was not impossible to use second-hand goods, as long as the steel could be made;

As long as this industrial chain is proven to be sustainable in the future, purchasing new equipment will not be a problem.

Yang Wendong smiled and said, "Okay, since it's like this, let's give it a try. You can also ask Lin Youqing to inquire in the United States to see if there are similar opportunities."

Investment in heavy industry is generally participated by state capital, and private capital is rarely willing to participate. For example, Singapore established Temasek last year, which is controlled by the state and then invests in some basic heavy industries. This is also the core factor for Singapore to maintain its own industry in the future.

Unfortunately, this is a completely sole proprietorship and Yang Wendong cannot get involved, otherwise it would be nice if he could invest a little.

With your own financial resources, it is not a problem to invest in a few heavy industries that you need. Although the cost-effectiveness is definitely not as good as real estate finance, it is also necessary if you want to grow bigger and stronger in the industrial field.

On the one hand, our container industry is absolutely dependent on steel, just like suitcases rely on plastic. On the other hand, when our scale grows, our home appliance industry and even our planned automobile industry will also require a large amount of steel.

In this era of expensive steel, the demand is too high, and that itself is the market, which can also maintain the demand orders of a small steel mill. As long as there is such a start, it can be gradually developed, and as long as there is a virtuous cycle, it does not even need to advance much funds, and the bank can pay most of it;
In this way, it will not affect your investment in real estate finance or other areas.

The only pity is that after the domestic reform and opening up in the future, the control over the steel industry will be very strict and foreign capital will not be able to participate. Although Hong Kong capital is a bit special, it cannot put all its eggs in this cage. In terms of time, his company needs it now and it is impossible to make a large investment in the early stage of reform and opening up. So it is not a big problem to try his hand in Taiwan now.

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(End of this chapter)