Journey 1995:Non-Stop

Chapter 424 Summary of the Olympic Year
This trip abroad was the longest Yan Hui had ever been away from home since achieving great success in his career. The heads of the three main companies all performed exceptionally well, and everyone wanted to take the opportunity to shine.

When Yan Hui returned this time, he didn't bring any gifts for everyone. After handling business for a few days, he gave a red envelope to each of the middle and senior managers who were not shareholders. This red envelope was given separately as a gift for his absence of more than ten days.

Yan Hui would say to each red envelope, "This is a gift I brought back for you from abroad," but inside were cash.

Yan Hui knew that no adult liked so many gifts. Giving money was the simplest and most popular approach. When dealing with subordinates, there was no need for complicated methods; just give them money. No employee dislikes being paid by their boss. If that wasn't enough, just keep giving them more.

In the following period, Yan Hui's steel trading company stood out at various bidding events in Jinan. No matter how much steel prices fell, Yan Hui's company offered prices lower than the agency price, and insisted on locking in prices for all bids.

His confident demeanor made some developers uneasy. Could prices really continue to fall? They've already fallen this much, how could they possibly fall any further?

Yan Hui didn't care. If they didn't accept the price lock-in, so be it. There were plenty of other options anyway.

2008年10月3日至10月17日，国内螺纹钢的报价从4772元/吨直线下跌至3531元/吨，半个月跌幅达到了1200元/吨以上，市场出现了严重的恐慌情绪。

Many developers who had not yet reached the penalty of 300 yuan/ton for breach of contract took the initiative to come to Yan Hui to communicate, hoping to further optimize the contract.

The so-called "optimization" meant paying less penalty money or fulfilling the contract according to market price. This was clearly an unfair unilateral breach of contract, but Yan Hui still agreed to a considerable amount.

You earn less money, but you gain a lot of goodwill. These goodwill aren't very useful, but at least you don't make enemies.

Yan Hui has already secured too many orders. With his excessively low prices, he can win a significant portion of the city's bids in September and October. Therefore, canceling a few orders will have no impact on him and will actually reduce his financial pressure.

The only problem is that many developers think Yan Hui is "easy to bully," and more and more developers are coming to him to discuss deals, which Yan Hui does one by one.

Cancelling the order is fine, but you'll still have to pay, just a little less. How much less depends on how much face you're willing to save.

In some cases, Yan Hui hadn't even started fulfilling the contract, hadn't deposited a single penny, and hadn't even delivered a single piece of steel, yet he had already received over 30 yuan in penalties for breach of contract—and these were "discounted" penalties.

In late October and November, the price of rebar continued to fall. In just two or three months, the price dropped by more than 35%, a drop that even frightened Yan Hui.

As Yan Hui had predicted, international shipping rates plummeted, with a drop exceeding 90%, and the more he learned, the more alarmed he became.

The freight rate for iron ore from Tubarão, Brazil to Baoshan Port has fallen from $108 per ton in June 2008 to less than $7 per ton, a fraction of its previous value!
The price drop reached 94%, which means the shipping cost is practically "free".

108美元一吨的运费，相当于每吨运费750人民币。我们假设高品位铁矿石的含铁量55%，那么每吨钢铁的运费成本折合1360元。而7美元每吨的运费，就相当于每吨钢铁的运费折合88元。

In other words, the plummeting steel prices are directly related to the sharp drop in international shipping freight rates. Currently, freight rates are practically zero; no matter how much freight rates are reduced, they won't affect steel prices. This abnormal, unprofitable freight rate structure is unsustainable. Anyone in business knows that short-term losses are acceptable, but long-term losses are worse than not doing business at all.

Simply put, freight rates have fallen as low as they can go, and steel prices are also nearing their bottom.

Yan Hui’s extensive experience in foreign trade and his observations in Brazil enabled him to shine in the steel market in October, November and December. At the end of November, he began to stop using fixed prices and switch to fluctuating pricing.

Because many developers owed him favors in the past, coupled with his excellent reputation, he had a significant advantage in normal bidding processes, becoming a highly influential steel distributor in Jinan, with a monthly steel supply exceeding 15,000 tons. At this rate, he could potentially supply 200,000 tons annually.

With 20 tons of steel produced annually, the annual turnover would be approximately 8 million yuan. Assuming a conventional profit margin of 3%, that would amount to 2400 million yuan in net profit. However, the actual figure was far higher because he had already begun "playing the steel game." In the last three months of 2008, due to the sharp drop in steel prices, Yan Hui achieved a net profit of 1600 million yuan in just three months, which exceeded the profit from the chemical industry.

At the end of the year, Yan Hui fulfilled all the promises he made in the middle of the year, distributing dividends to the shareholders of Heng Hui Chemical. His cousin and brother-in-law had already recovered all their investment funds, and Chen Jian also received dividends and bonuses of nearly 200 million yuan.

After receiving such a return on their investment, Yan Hui's cousin and brother-in-law sent valuable gifts to his family, which were received by his grandmother and parents on his behalf. Yan Hui didn't care or ask about them.

On the steel company side, Yan Hui also distributed a total of 100 million yuan, Wang Yongjun received a full 40 yuan, Sun Lei arrived late but had shares, and received a total of 45 yuan this year, while the remaining four or five salesmen each received 15 yuan.

In less than six months, Sun Lei earned what a bank would take several years to make.

The tile company has been making a stable profit of over 100 million yuan per month recently. Yan Hui has also distributed money to each shareholder according to their share, and Pan Chen has also received a generous bonus.

To be honest, Yan Hui didn't know exactly how much money he made in 2008, but in general, he should have made a profit of 60 to 70 million yuan, which was an astronomical figure that he had never dared to imagine before.

This year also saw a lot of spending. Investment in fixed assets (a new tile factory and a new chemical plant) cost about 4000 million yuan, and buying a car cost some "spare change," leaving a lot of money still remaining.

As the steel business returned to normal, Yan Hui's account balance grew larger and larger. He fulfilled two promises: he provided a Coaster bus for the company office and hired a new driver; he bought a Mercedes-Benz E-Class sedan for his fourth brother and had a tow truck deliver the car directly to the village.

Such high-profile behavior made countless villagers extremely envious, but they couldn't say anything. The Yan family's position in the village was now unshakeable, and no one dared to challenge it.

Many people with the surname Xiao went to Lao Si's house to borrow money and cars, but there was no one in Lao Si's house at all; the whole family was in Gansu Province.

Yan Hui was straightforward; he had someone open Lao Si's door, delivered the car to the yard, and then left the car keys at his own house.

A few days later, the fourth brother had no choice but to return to the village from out of town, drive away, and not give anyone else a chance to look for him.

(End of this chapter)