Those Years When I Was Forced to Top the Forbes List

Chapter 353 Panzhihua Iron and Steel Group, Rare Earth (Part 1)
"Eh!"

Xu Yi smiled and entered the room.

The suite was over a thousand square meters, with rooms inside rooms. Seeing that President Chen was only going inside, he sensibly closed the door behind him.

After closing three doors in a row, I finally arrived at an office.

The room was warm, and Mr. Chen, wearing only a white shirt, leaned casually against the edge of the desk, looking at him with a smile and saying, "Mr. Xu, don't be nervous, sit wherever you like. Would you like a cigarette?"

Xu Yi then realized that he was a little nervous. The reason was probably that he had vaguely heard people talking about how Hanlong had been asked to give up a big project by this General Manager Chen. In addition, the presence of the tycoon General Manager Yu guarding the door made him even more shocked.

Upon hearing Mr. Chen mention smoking, he quickly took out a cigarette and prepared to offer it to him.

Chen Xuebing waved his hand to indicate that he didn't need it, but handed him an ashtray. Then he turned the laptop on the table towards himself, looked at it carefully for a while, and then broke the silence.

"Old Xu, your price is a bit too high."

"Mr. Chen, rebar HRB400 is 3200 per ton, 6.5mm wire rod is 3600 per ton, medium and heavy plates are 4500 per ton, and 2.75mm hot-rolled coils are 3950 per ton. To be honest, these are prices for friends. Which specific part do you think is more expensive?"

Xu Yi looked troubled, thinking that he had to discuss it separately. If that didn't work, he would make some concessions on the sheet metal, but he absolutely could not compromise on the wire rod and rebar.

Chen Xuebing laughed and said, "Taller than others."

Xu Yi's mouth twitched slightly.

taller than others
What is the reason for this?
That does seem like a valid reason.

But he was a little skeptical.

"Mr. Chen, you know that our steel products face cross-regional competition. The price difference between us and Chongqing, or even Xi'an, is less than 50 yuan. There's really not much room for negotiation. We sell a ton of material for several thousand yuan, and we only make a hundred or so yuan. You're purchasing on a 10,000-ton scale, and we've already given you an extra discount, making it even lower than ours. How can you possibly make any money?"

Xu Yi noticed that Chen Xuebing didn't mention the specific standards for steel, so he figured Chen Xuebing might be an outsider. Not wanting to offend him or have the other party arbitrarily lower the price, Xu Yi explained his costs and profit margins.

But Chen Xuebing certainly understood.

He even knew very well that the other party's most profitable area was the thicker sheet metal, with a profit of about 200-250 yuan per ton according to Jiafeng Industrial's quote.

However, the steel industry does indeed have high profit margins, leaving little room for negotiation.

He pondered for a moment and said, "How about this, we won't take the medium and heavy plates. As for the others, let's not talk about prices, let's talk about the contract."

"Huh? You don't want medium and heavy plates?" Xu Yi felt a pang of pain upon hearing that the biggest profit margin had been cut.

“We have a special steel plant and can produce it ourselves. The materials also have special requirements. What, this business can’t be discussed because we don’t have medium and heavy plates?” Chen Xuebing chuckled.

Medium-thick plates are embedded in beams, columns, and floor slabs, and are key materials for absorbing earthquake energy. He asked the manufacturer for a quote, just for reference.

Xu Yi was at a loss, but since it was still a business deal involving tens of thousands of tons, he could only say, "President Chen, what do you mean by discussing the contract?"

"Mr. Xu, let me correct you first. Our steel consumption is not in the tens of thousands of tons, but in the hundreds of thousands of tons. Of course, you won't be the only supplier, but considering that you have the qualifications to be a distributor for both Panzhihua Iron and Steel Group and Baotou Steel Group, one in the south and one in the north, there is a lot of room for cooperation in the future. So this time I don't plan to lower your price. In terms of purchase volume, I also plan to give you more. My idea is more than 50,000 tons."

Upon hearing this, Xu Yi felt a surge of joy.

Fifty thousand tons?
That's a profit of nearly ten million!

Mr. Chen's pacing continued: "Not only here, we also have a large factory construction project in Hefei, you know BOE, right? It may require tens of thousands of tons of steel. In addition, we have acquired a 500,000-square-meter commercial plot in Hefei. As long as Baogang can supply the land, you can participate. These are all the projects planned for the first half of this year. In the second half of the year, we will build a 260-meter commercial landmark in Shanghai. Next year, we will acquire land across the country, with a construction area of ​​at least 10 million square meters and a building area of ​​over 30 million square meters."

Xu Yi was somewhat stunned.

Thirty million. Isn't that even more ruthless than Vanke?

“You might not believe me now, but you can go online and check how big our actions are; you’ll see soon enough.”

Chen Xuebing chuckled as he spoke, then uttered two key words.

"but."

There's always a "but".

"You need to remove the steel price fluctuations from this year's contract for me."

Upon hearing this, Xu Yi, who was still in a daze, shook his head repeatedly without even thinking: "President Chen, that's impossible! The benchmark price fluctuation clause is our lifeline, how could it be removed?"

Steel prices fluctuate quarterly, and sometimes even monthly. Price changes far exceed profits. Without a floating clause, what if prices rise? Wouldn't we suffer huge losses?
“I didn’t ask you to take on any risks. What I mean is that you have to advance the funds, whether it’s stockpiling or placing pre-orders. We only care about the results. We will pay 30% of the steel price in advance, and you can cover the rest. The steel supply for the entire project must be maintained at the current price.”

There's really not much to discuss regarding steel prices.

However, the fluctuations in steel prices allow for greater flexibility.

This year is a year of rising steel prices. Take rebar for example, it's currently at 3200, and it will be at least 4500 by the end of the year. It will continue to rise until the financial crisis next year, at which point the price will come down again.

Chen Xuebing currently doesn't have spare money to stockpile steel. Making money in the stock market is much faster than in steel, and stockpiling steel and iron involves environmental protection. He also doesn't want to build so many professional warehouses. It would be better to pay part of the material costs in advance and let others stockpile for him.

These conditions put Xu Yi in a difficult position.

It is reasonable for steel to be paid in batches, with 80% paid upon acceptance and 20% retained as a quality guarantee deposit until the project is completed and accepted.

This is a 30% advance payment.
They have plenty of funds in the early stages, but once a large amount of steel enters the market, their upfront investment will be substantial.

wrong.

Orders must be placed in advance!

They have to pay at least 80% of the payment to the steel mill upfront!

"The amount of upfront investment is too much! Mr. Chen, we can't do it! For 50,000 tons of steel, even if you pay 30%, our upfront investment will still be close to 100 million!"

Chen Xuebing's smile remained unchanged: "President Xu, aren't you going to ask why we signed this contract in the first place?"

Xu Yi fell into deep thought, his eyes gradually showing disbelief.

"Mr. Chen, are you sure it will go up? That's impossible, isn't it?"

Chen Xuebing's lips curled into a mysterious smile: "The news that an international speculator is interested in high-speed rail ore is more valuable than the contract itself. Whether Mr. Xu can continue to obtain such valuable information in the future depends on your attitude towards cooperation."

In China, steel mills of a certain size import 50% of their iron ore for steelmaking. It is reasonable for international iron ore prices to rise, leading to higher steel prices. It is impossible to verify whether there are any behind-the-scenes manipulators.

Xu Yi felt his worldview was being challenged. If this could really be driven by speculators, then wouldn't his business have a cheat code?

He wanted to refute it, but since the other party had taken real money and was about to sign a contract, it couldn't have been just a casual remark.

The company certainly has the capacity to stockpile a batch of steel, and it could really make a profit from that.
But just the upfront investment would require tens of millions of dollars.

He sat down on the sofa and looked at the ashtray on the coffee table, which contained several cigarette butts of different brands. He finally understood why President Chen had handed him an ashtray as soon as he came in.

Light a cigarette and think quietly.

To call it thinking is really just about convincing yourself.

On one hand, there's a money-making opportunity spanning tens of millions of square meters of construction area, plus a potentially lucrative "industry secret"; on the other hand, there's a cold shoulder, a refusal to take the plunge, and a lack of respect for the other party.

If he hadn't made the right choices, his business wouldn't be where it is today.

After finishing his cigarette, he stubbed it out forcefully.

“40%.” Xu Yi sighed. “President Chen, you pay 40% first, and we also have to pay 40% to help you lock in the production capacity and price for this project, is that alright?”

Chen Xuebing smiled and extended his hand: "Congratulations, Mr. Xu. With you becoming a partner of Gu'an, your business will definitely reach a new level."

Xu Yi forced a smile and shook hands with Chen Xuebing. "President Chen, I hope to get your help in the future."

"That's natural. Iron ore prices should start to move before the second quarter. If we prepare early, steel prices will rise by at least 40 percent this year."

Xu Yi's heart trembled violently: "So many?"

Chen Xuebing didn't explain, but just smiled and said, "I'll talk to General Manager Yu later to see if we can lower the supply price from Panzhihua Iron and Steel to you this year. If we can reach an agreement..."

Xu Yi became excited: "Then we will definitely lower the price of Gu An! No! Lower it even more!"

We talked to each of the dozen or so relatively strong suppliers for about ten minutes.

Everyone walked out of the room with a smile.

These people all have strong brands behind them and hundreds of millions of yuan in capital. Although not everyone offered a price that satisfied Chen Xuebing, almost everyone lowered their prices again and became part of Gu'an's supply chain. The only difference was the amount of purchases they were given, depending on the conditions.

The price won't be slashed all at once. Everyone will participate first, and then there will be a process where we prove our strength and sincerity to each other.

At 5:30, Chen Xuebing walked out of the room, leaving only Ye Yuanxi and Yu Zisu in the reception room outside.

"Mr. Yu, I'm sorry to have kept you waiting."

Chen Xuebing and Yu Zisu shook hands.

"I'm sorry, Mr. Chen, there are rules regarding our steel supply, so we can't directly contact you."

"I understand. You have distributors and agents, and my business isn't very big. I appreciate it that you came in person. Let's have a meal together and talk slowly?"

"Let's skip the meal. We have to catch a plane at 8 o'clock to go to the China Building Materials Academy for a research trip tomorrow morning." Yu Zisu checked the time.

Chen Xuebing then noticed that Yu Zisu was carrying a rather large briefcase, and he admired Yu's composure. His flight was at eight o'clock, so he should have left here by six o'clock at the latest, but he waited here unhurriedly until five-thirty without urging him at all.

It's a pity I don't have a private jet, otherwise I could show off my extravagance right now.

"Mr. Chen, you two chat! I'm hungry, I'll go downstairs and grab a bite to eat!" Ye Yuanxi said, taking his leave at the opportune moment.

Chen Xuebing gave him a grateful look.

"Mr. Yu, I'll take you to the airport! We'll talk on the way!"

The Mercedes-Benz drove smoothly.

Looking out the window at the scenery, Chen Xuebing smiled and said, "President Yu, the State-owned Assets Supervision and Administration Commission is pushing for the merger of central enterprises. Panzhihua Iron and Steel must be struggling a lot. I heard that Wuhan Iron and Steel has designs on you?"

Yu Zisu grinned, also looking out the window. After thinking for a moment, he shook his head and said directly:
"It's unlikely, and the employees of Panzhihua Iron and Steel Group don't agree either."

Of the four state-owned steel enterprises, Wuhan Iron and Steel (WISCO) is only slightly larger than Panzhihua Iron and Steel (Pangang), ranking third. How could Pangang possibly agree to merge with them?
"The State-owned Assets Supervision and Administration Commission (SASAC) aims to reduce the number of central enterprises to below 100. I don't think this goal is unrealistic. Mergers among steel companies are inevitable," Chen Xuebing said with a hint of certainty.

Since its establishment in 2003, the State-owned Assets Supervision and Administration Commission (SASAC) has proposed to merge 196 central enterprises into fewer than 100.

In recent years, the mergers and acquisitions of China Coal, China Minmetals, China Water Resources, China Civil Engineering Group, China Railway Group, China Animal Husbandry & Industry Group, China Fisheries Group, OCT Group's restructuring of Hualian Group, China Harbour Engineering Company and China Road & Bridge Corporation's merger with China Communications Construction Company, and later the mergers of Gezhouba Group, State Grid Corporation of China, China Southern Power Grid, and China Energy Engineering Corporation, as well as the merger of CNR and CSR, have all been major events in the development of the country and the stock market.

This also includes the merger of Panzhihua Iron and Steel Group into Anshan Iron and Steel Group, and the merger of Baosteel and Wuhan Iron and Steel Group.

Nobody wants to be acquired.

A state-owned enterprise represents decades of corporate history and the livelihoods, benefits, and resettlement of tens of thousands of employees.

Who merges with whom depends on who is larger.

In recent years, Panzhihua Iron and Steel Group has worked very hard, acquiring Chongqing Titanium Industry and Jiangyou Great Wall Special Steel. Now it has three listed companies under its umbrella: Panzhihua Iron and Steel Vanadium, Panzhihua Iron and Steel Titanium Industry, and Great Wall Steel.

Chen Xuebing has recently been buying a large amount of shares in Pangang's own listed parent company, Pangang Steel & Vanadium, which has a market value of 220 billion yuan.

Of course, the purpose of buying is not to do anything special, but simply to make money.

Chen Xuebing had been trapped in this company for over a year in his previous life, so he knew it quite well.

Panzhihua Iron and Steel Group (Pangang) started out as a steelmaking company, and its core asset now is the vanadium-titanium iron ore resource base in the Panzhihua-Xichang region.

Vanadium can be used as an alloying additive and also in new energy batteries. Titanium is most commonly known for titanium alloys, as well as titanium dioxide pigment, used in wall coatings, automotive coatings, and industrial coatings. Nano-sized titanium dioxide can also be used in cosmetics.

Both types of iron ore have high-value cycles, so the stock price of Panzhihua Iron & Steel also fluctuates cyclically. Chen Xuebing held this view when he bought in his previous life, thinking that he could ride a cycle before buying, but it took him almost a year to get out of the trap.

Therefore, he also knew that Panzhihua Iron & Steel Group's stock price would rise in this bull market, and the rise would not be weak.

And the fact that it hasn't even been started yet makes it all the more precious.

As a large-cap stock with a market capitalization of over 20 billion yuan, Chen Xuebing decisively acquired 800 million yuan worth of shares after New Year's Day, almost reaching the threshold for mandatory disclosure of shareholding.

The stock market also reacted to the sudden appearance of a major shareholder in Changzheng, with Panzhihua Iron & Steel's stock price rising by nearly 30% recently.

In Yu Zisu's eyes, this was another signal: President Chen was really going to come and help.

That's why we had to wait for several hours this afternoon.

Chen Xuebing knew that the other party had come to ask for a solution, so he got straight to the point and didn't waste any words.

"Pangang Group wants to escape the fate of being acquired, but its ability to generate profits and generate revenue is lacking, and its self-positioning is not unique enough."

Yu Zisu strongly agreed with the first point. In 06, Panzhihua Iron and Steel Group had a revenue of 400 billion yuan, but its profit was only 8 million yuan, and the profit margin was getting lower and lower.

However, on the second point, he believes it is not a positioning issue. Panzhihua Iron and Steel Group's positioning is very clear. The current problem is the size of its assets.

Baosteel has assets of 2140 billion yuan and revenue of 1768 billion yuan last year.

Ansteel has assets of 750 billion yuan and revenue of 700 billion yuan.

Wuhan Iron and Steel Group has assets of 710 billion yuan and revenue of 550 billion yuan.

Panzhihua Iron & Steel Group's assets have now exceeded 500 billion yuan, with revenue of 438 billion yuan.

"We have applied to the State-owned Assets Supervision and Administration Commission to initiate the merger of listed companies. As long as we can successfully transfer the stock market shareholders of Panzhihua Iron & Steel Titanium Industry and Changzheng Shares to Panzhihua Iron & Steel Vanadium, and fully merge the assets and management of these two listed companies, our scale will be able to reach a new level."

The two companies that went public in the past two years, although they are the major shareholders, each have their own separate operations. As long as they achieve true financial consolidation, their revenue will surge, approaching or even surpassing that of Wuhan Iron and Steel.

Chen Xuebing chuckled: "President Yu, you're treating the merger of state-owned enterprises like a game of chasing a bear. You think that even if you can't outrun the bear, as long as you can outrun your teammates, you'll be fine. But have you ever considered that the bear isn't just going to eat one, but two? Do you think you're safe once you reach third place? Do you think Wuhan Iron and Steel will agree to let you merge with them?"

Yu Zisu's expression froze for a moment.

He wasn't unaware of the problem; he was simply helpless.

"Let's take it one step at a time. It will take time to catch up with Ansteel."

Fortunately, Ansteel, which is in second place, is not Baosteel, nor is it an unattainable target. As long as we run fast and gain time, we still have a chance.

"Let me start with profitability. In my opinion, in 2007, Panzhihua Iron and Steel Group had at least three profit opportunities, both from internal operations and external operations."

Chen Xuebing knew that state-owned enterprises had a certain inertia in their development, or what could be called "a large ship that is difficult to turn around", so he first talked about short-term interests.

"Oh?" Yu Zisu sat up straight, adopting an attentive listening posture.

Chen Xuebing's next words left Yu Zisu with a puzzled expression.

"These three opportunities represent three increases: iron ore prices will rise, the RMB exchange rate will rise, and stock prices will rise."

(End of this chapter)