Chapter 331 Wave (I)
Australia.
Perth, the capital of Western Australia
Inside the BHP Billiton office building.
Hank Maersk, who is in charge of the company's iron ore industry in Western Australia, looked very unhappy: "Headquarters wants us to shut down 50% of our production capacity?"
The secretary nodded helplessly: "Yes, Mr. Manager."
Hank Maersk was very troubled by the notice of production cuts and layoffs sent by the headquarters.
Hank Maersk had no power to refute the decision of BHP Billiton headquarters. After all, the head office had no choice but to do so.
Why would BHP Billiton shut down 50% of its production capacity if it could make money?
The reason for shutting down 50% of the production capacity is mainly because a spoiler has appeared in the international market at this time.
That's Sapiens.
After formalization, the Sapiens Company reorganized its internal mining and metallurgical industries.
It established three mining subsidiaries, namely Jade Mining, Coral Mining and Nanyang Mining, and three metallurgical subsidiaries, namely Sea Snail Metals, Mandalay Metallurgy and Sumatra Metallurgy.
At the beginning, these two systems did not have much impact on BHP Billiton, Rio Tinto and Vale.
Until September.
The completely integrated mining and metallurgical systems of the Homo sapiens began to form a group to attack BHP Billiton, Rio Tinto and Vale.
The offensive of the Intelligent Company is carried out in two aspects, namely the raw material market and the finished product market.
On the one hand, Jade Mining, Coral Mining and Nanyang Mining are fully committed to mining hematite on the seabed of the Sulu Sea, pyrite in Sumatra and deep magnetite in the southern part of Mount Thani Thaung. These three iron ore producing areas have a total reserve of 17.3 billion tons of iron ore with an average grade of 43.6%.
If it was just iron ore mining, the problem would not be serious, after all, the trade channels of the Homo sapiens company were blocked by Europe, the United States and the Far East.
But how could the Sapiens Company only make one move?
Its subsidiaries, Sea Snail Metal, Mandalay Metallurgical and Sumatra Metallurgical, rapidly lowered the ex-factory price of finished steel.
In September this year, the global ex-factory price of steel was about US$450 to US$500 per ton for ordinary steel, while the landed price of Australian iron ore with a grade of 62% was about US$120 per ton.
The landed price of the selected 62% hematite ore of Zhiren Company is 35 gold yuan per ton (equivalent to 70 US dollars per ton).
The ex-factory price of ordinary steel produced by Zhiren Company is 180 gold yuan per ton (equivalent to 360 US dollars per ton).
The impact of this price is very bad.
Because the profit margin of steel companies in China is only US$8 to US$15 per ton, the profit margins of steel companies in other regions are also not high.
Europe, America and the Far East have blocked Homo sapiens’ market channels, but that doesn’t mean the whole world will listen to them, especially when it comes to interests.
For example, the oil giants in West Asia, after doing the math, found that purchasing steel from Homo sapiens could reduce costs by about 20%.
Since you have a lot of foreign exchange, why don't you choose the steel products of Homo Sapiens? Do you think you have too much money?
Another example is the cash-strapped African countries, which have earned some gold by selling minerals, oil and natural gas, so they naturally want to maximize the cost-effectiveness of the gold.
South Asia, Central Asia, and Latin America also chose Homo sapiens steel products.
Even some European countries secretly import steel products and iron ore from Sapiens through middlemen such as Saudi Arabia and Egypt.
As a result, the pressure is on the major steel companies in the Far East. Will they give up the high-priced iron ore from Australia and Brazil, or continue to insist?
The first to make a choice were a group of steel companies in China. They reached an agreement with Zhiren Company, which was that Zhiren Company would provide iron ore and help Zhiren Company produce steel at a processing fee of 125 gold yuan per ton of steel.
Although the net profit is only about 5 gold yuan per ton, the benefit is that it can obtain cheap iron ore supply.
As the world's king of steel production, Chinese steel companies have demonstrated their status as the king of steel production, directly lowering the global ex-factory price of steel to an ultra-low price of only US$360 to US$390.
And a chain reaction ensued.
You should know that in 2021, 60% of the iron ore on the international market was taken up by Chinese steel companies, and the metallurgical subsidiary of Zhiren Company took up 21% of the iron ore share.
Together, the two companies account for 81% of iron ore in the international market.
Now Zhiren Company fully uses its own iron ore, and Chinese steel companies are also forced to use Zhiren Company's iron ore.
All of a sudden, 81% of the market share was lost.
BHP Billiton, Rio Tinto and Vale suddenly had a huge overcapacity.
Even though America has restarted some of its steel production capacity in order to deal with the threat from Sapiens, North America has long passed the stage of using iron ore for smelting, and their steel mills mostly use scrap steel as raw materials.
There is over 1.3 billion tons of iron ore overcapacity. How can we solve it?
There is simply no solution.
The remaining steel companies in the world simply cannot digest 1.3 billion tons of iron ore, so drastically reducing production and laying off employees are the only options for BHP Billiton.
Of course, they can also choose to reduce prices and promote sales.
They can't beat Sapiens just by lowering prices and promoting sales.
According to research reports from international organizations, the production cost of Australian iron ore is approximately US$40 per ton, while that of Brazil's Vale is approximately US$60 per ton.
After adding the transportation costs, the landed price of Australian iron ore shipped to the Far East will be around US$60 per ton, while Vale's landed price will reach US$90 to US$100 per ton.
How does this price compete with Sapiens?
The production cost of the ore of Zhiren Company is super low, and the transportation distance is also very short. The landed price is 35 gold yuan per ton, and there is actually a 40% profit.
In other words, once BHP Billiton cuts prices for promotions, Sapiens will definitely cut prices further.
With no alternative but to do so, BHP Billiton began to cut production and lay off employees.
Mines in Western Australia were hardest hit.
Hank Maersk has already felt the pressure and malice from Sapiens. According to the current trend, the remaining 19% market share is actually in jeopardy.
After all, the steel mills in South Korea, Japan and the European Union will definitely not last long.
Chinese steel companies now occupy the low- and mid-end international markets, while Zhiren Company occupies the mid- and high-end markets, making other steel companies cry for their parents.
Not purchasing ore from the Sapiens Company?
Then you guys go to hell!
This is also the reason why some European steel mills secretly purchase Homo sapiens ore. They have no choice but to make this choice in order to survive.
If it were a traditional international market, BHP Billiton and its backers would definitely use financial means to directly take up all the low-priced iron ore and continue to maintain their market monopoly.
However, they encountered the Homo Sapiens Company. The existence of money directly blocked the possibility of European and American financial capital manipulation.
After all, to purchase iron ore from the Zhiren Company, they would need to prepare at least hundreds of billions of gold yuan.
The trade currency currently circulating in the world is only over 300 billion.
European and American capital forces simply cannot gather so much money, so naturally there is no way they can attack Homo sapiens' iron ore layout.
Even if they can gather so much money, the Intelligent Company can still act like a rogue and directly restrict their purchases, requiring that only steel companies can be qualified to purchase, thus foiling the other party's conspiracy.
Faced with this head-on confrontation, BHP Billiton felt extremely uncomfortable.
Now the only way to stabilize the internal situation is to reduce production capacity and lay off employees.
But reducing production and laying off employees is just a temporary solution.
There is no problem if the iron ore is not mined, but those large-scale mining equipment, ore dressing and washing, sintering equipment, heavy-duty railways, iron ore transport ships and the like are depreciating all the time, and these costs cannot be cut.
If production is stopped for just a year or two, these devices will become scrap.
What is more serious is that once industrial workers leave, it will be very difficult to train them again.
If an industry stops production for more than 10 years, the supporting industrial workers and the supporting majors in schools may disappear directly.
This is also the problem that North America is facing at this time. The hollowing out of their industries over the past few decades has caused North America to lose a large number of industrial workers and supporting training systems.
