Sail across the sea

Chapter 577 No objections
"We can manufacture such a set of equipment."

After reviewing the schematic diagram, Pan Yue had a clear understanding of the process. He then spoke to Gao Fan and Yu Guorong:
"The equipment and installation will cost around 2500 million. The main reason is that fluorides are highly corrosive, and the reaction vessel requires special metals, which are very expensive. A more detailed cost can only be calculated after the design is completed. If you want to build it, you can sign a preliminary agreement first, and then I can arrange for the technical department to carry out the design."

"What is the production capacity of this equipment?" Yu Guorong asked eagerly.

He asked this question to both Gao Fan and Pan Yue at the same time. Pan Yue remained silent, while Gao Fan replied, "With an annual output of 4000 tons, the production cost per ton can be controlled below 35000 yuan."

"The production cost per ton is only 35000 yuan, are you sure?"

Pan Yue stared wide-eyed and asked.

Gao Fan nodded and said confidently, "I'm sure. Our engineers have done the calculations, and according to our production process, the production cost of each ton of PTFE can definitely be controlled below 35000 yuan."

"If that's the case, then we're in big trouble," Pan Yue muttered.

Currently, the price of PTFE on the international market is approximately US$1 per ton, which is equivalent to about RMB 55000 at the current exchange rate. Imported PTFE is slightly more expensive, at around RMB 65000 per ton.

The price of domestically produced PTFE is 55000 yuan per ton, which is 10000 yuan lower than that of imported products. However, the quality of domestically produced PTFE is much worse than that of imported products. Many users would rather pay a higher price to buy imported PTFE, and would only consider using domestic products when imported products are unavailable.

Shuainan Province has three PTFE production enterprises, each with an annual capacity of around 1000 tons, but their actual output is only about half that. This is thanks to the national policy of restricting PTFE imports; otherwise, they might not even be able to sell their products.

Pan Yue had researched the production costs of these three companies, and the average cost was around 42000 yuan per ton, which meant that they could make a profit of more than 10000 yuan per ton of product, which was considered quite comfortable.

Gao Fan claimed that his production equipment could produce 4000 tons of products per year, with quality no less than imported products, while the production cost was only 35000 yuan. Pan Yue could imagine how tragic the fate of the three companies in the province would be once this equipment went into production.

Gao Fan isn't from Shuainan, so he doesn't need to consider Shuainan Province's feelings. But Pan Yue is different; he's part of Shuainan's chemical industry system. If Gao Fan squeezes these three companies in Shuainan out of business, the provincial leaders will definitely blame Pan Yue and question him about why he can't develop equipment of the same level.

Furthermore, if Gao Fan's production equipment was manufactured by a water treatment plant, then Pan Yue's crime would be even greater.

Yu Guorong overheard their conversation and was overjoyed. He looked at Pan Yue, whose face was full of worry, and comforted him, "Chief Engineer Pan, didn't you hear what General Manager Gao just said? He wants our Guoguang Group to invest in this PTFE plant. Once it's built, the profits will stay in our Shuainan Province. This is also thanks to you, Chief Engineer Pan."

“Of course I know that,” Pan Yue said. “I have to thank this kid for bringing this project to our Shuainan. If he had brought it to Maolin, I would have had no way to explain it to the province.”

Gao Fan laughed and said, "Look at what Chief Engineer Pan is saying. What kind of relationship do we have? Would I do something like that to harm a friend? Don't worry, our newly built equipment is definitely not in competition with your original three equipment sets in Shuainan. We are targeting the overseas market and are going to make money from foreigners. Of course, if there is a supply shortage in the domestic market, we will not stand idly by."

Pan Yue smiled wryly: "Alright, alright, Mr. Gao, stop with the high-sounding rhetoric. If your equipment truly achieves the performance level you claim, regardless of whether your products are sold domestically, those three original companies will definitely be in trouble. Just give me a straight answer: if those three companies intend to upgrade their equipment according to your process, would you allow it?"

"As long as they are willing to pay the technology transfer fee."

What are the pricing standards?

"About 1000 yuan per ton of production capacity."

“If each ton of production capacity costs 1000 yuan, then 1000 tons of production capacity would cost 100 million yuan…” Pan Yue calculated in his mind, nodded and said, “This standard is not too harsh. When the province introduced those two 1000-ton-class devices, each one cost more than 3000 million yuan. Spending a few million yuan on technology upgrades should be acceptable to them.”

"I actually hope they don't accept it," Yu Guorong muttered somewhat resentfully.

Gao Fan advised, "Old Yu, you don't need to be dissatisfied with this matter. The international demand for PTFE is over 10 tons, and it's growing by more than 10% every year. Our production costs are low, and we are fully competitive internationally. We can just go and grab the international market when the time comes. As for those three companies in Shuainan, let them carve up the domestic market. We don't care."

“Yes, yes, we don’t care,” Yu Guorong quickly agreed.

He had known for a long time that Gao Fan and Zheng Linong had a good relationship. Such a person would definitely consider the impact when doing things, and would not keep a technology to himself and prevent other domestic companies from learning it.

People who eat alone are easily hated, and even Yu Guorong himself did not want to be known as someone who eats alone.

Gao Fan is right. If your products are of good quality and have lower production costs, then it's possible to make money in the international market. In recent years, some township enterprises in Shuainan have begun to enter the international market, and they have all stated that making money in the international market is much easier than in the domestic market.

Domestic consumers are generally quite poor and very price-conscious, forcing manufacturers to compete by undercutting each other. The situation is much better in the international market. Foreigners are generally wealthy, and Chinese goods are surprisingly cheap, so they don't bother to haggle. Therefore, companies that can do export trade are unwilling to return to the domestic market.

Regarding the specifics of PTFE, Yu Guorong was still unclear about the situation in the overseas market. Since Gao Fan said the market was huge and he could capture a share, he would simply follow Gao Fan's advice; Gao Fan never disappointed him.

“President Yu, you heard what Chief Engineer Pan said earlier. The cost of this equipment is about 25 million. I think our two companies should partner up. Guoguang Group will contribute 13 million, and Canghai Chemical will contribute 12 million in cash. We will also waive the 1 million technology licensing fee. The shares will be split 50/50 between our two companies. What do you think?” Gao Fan asked.

Yu Guorong laughed heartily and said, "If President Gao says so, then there's definitely no problem. I know that President Gao is leading me, Old Yu, to make money on this project, and I have no objections."

(End of this chapter)