Coming back to his senses, Qian Hongming immediately called one of his creditors. The creditor seemed to have been awakened by the phone call, speaking groggily, while Qian Hongming spoke with full vigor: “A’Qi, get someone good-looking to tail me, might as well have me take them on as a bodyguard. Damn.” After saying these few sentences, Qian Hongming hung up the phone. Standing on the balcony, looking down at the distant ground, he wondered how many eyes were still watching this apartment. He suddenly remembered something he had forgotten to mention when meeting Liu Jun in the evening. Despite his fatigue, he hurriedly sent a text message, very simple: “Something to cheer you up – Yang Xun asked me for a loan through an intermediary, very urgent, offering very high interest.”
Liu Jun was certainly no pushover. When he saw the text message in the morning, he immediately spread the news. Instead, Cui Bingbing looked puzzled – wasn’t borrowing money quite normal? High-interest borrowing for re-lending was as common as household matters locally. The people making a big fuss were the ones with real problems. Liu Jun found many reasons, but they were all ruthlessly rejected by Cui Bingbing, so he had to sheepishly go make breakfast.
But Liu Jun was still happy inside. No matter what, the powerful Yang Xun was urgently seeking high-interest loans; however, when he heard it, he felt that Yang Xun was in trouble, completely ignoring Cui Bingbing’s rebuttals. However, in the afternoon, Liu Jun joined the entire nation in watching Sichuan with stunned and heavy hearts, glued to the internet, constantly refreshing news pages, getting messages sent back from the earthquake frontlines. Yang Xun’s loan request, such a trivial matter, was thrown to the back of his mind. He immediately had the office check employee backgrounds, having employees from Sichuan quickly call home to check on their families’ safety. Fortunately, between the two factories and one center, there weren’t many Sichuan employees to begin with, and phone calls home confirmed everyone was safe.
After work, Cui Bingbing called, asking Liu Jun to pick up Dandan from her mother’s house if he could get off work on time. She was working with Qian Hongying on some documents regarding the house purchase and might be home quite late.
The Cui family was well-off with considerable money on hand. He also wanted to contribute money to help the Cui family move to a better neighborhood, but the Cui parents refused, saying it wasn’t necessary. So the elderly couple continued living in the old residential complex in the city center, with supermarkets, markets, and hospitals all within a twenty-minute walk. They felt such neighborhoods were truly suitable for living. Liu Jun walked through the complex’s evening air filled with the aroma of cooking from range hoods, arriving downstairs at his mother-in-law’s building. He saw his mother-in-law just leading a young man upstairs, so he followed with big steps – turns out the young man was a scrap collector.
Cui’s mother refused to sell waste newspapers, complaining that the scrap collector’s prices were too low, only willing to sell oil bottles and beverage bottles to him. The scrap collector didn’t insist, just smiled and said if she wanted to sell, sell quickly – it was already mid-May, and after the Olympics, prices for such things would all drop. Upon hearing this, Cui’s mother exchanged a meaningful smile with her son-in-law, finding this scrap collector quite interesting, so she dragged out several bundles of waste newspapers piled under the bed to sell. Seeing this family had goods, the scrap collector became more active, urging Cui’s mother to sell scrap quickly – things like waste paper, scrap copper, scrap steel, waste plastic would all drop after the Olympics. Right now, the country is maintaining a face for foreigners to see, giving everyone good opportunities. After this village, there won’t be this shop.
After the scrap collector left, Liu Jun said, “Nonsense. The provincial steel distributor I often buy materials from has been hoarding goods all year, recently pressing even more inventory, even stockpiling considerable iron ore at the docks, betting that our country’s iron ore negotiations with Australia will result in another major price increase soon. International bulk commodities are all rising rapidly – how could our country’s Olympics control that?”
“Today has been full of disasters – snow disaster at the beginning of the year, major earthquake today. Who knows how much damage there will be? There must be bad effects.”
“The current bulk commodity market is very strange, like China’s stock market last year. When bad news comes out, it’s clearing the bears completely, so prices rise. When good news comes out, they rise even more. Any reason becomes a reason to rise. The freezing rain at the beginning of the year and the major earthquake will probably have another interpretation in the bulk commodity market – disaster relief, post-disaster reconstruction, aren’t those all expanding material demand? This market is really strange.” Liu Jun knew his mother-in-law refused to admit to old age and wouldn’t be a housewife. She was only staying home to hold her grandson because she had no choice for her daughter’s sake. When discussing current affairs with his mother-in-law, he couldn’t be perfunctory.
But after leaving his mother-in-law’s house, Liu Jun felt more and more wrong the more he thought about it. It seemed he was more convinced by the scrap collector’s persuasion. It was just that Dandan chattered all the way, so Liu Jun had no time to think carefully. But even without careful thought, Liu Jun realized that downstream orders internationally were decreasing. Export orders weren’t just their company’s alone, but the entire industry’s. Recent bankruptcy phenomena, though covered up by officials, were still widespread in the Yangtze River Delta and Pearl River Delta, indicating a universal phenomenon. So the impact should quickly be transmitted to bulk commodity trading. Even if bulk commodity trading was affected by speculative funds, it couldn’t deviate too far from fundamentals. Even though PPI was now high, even higher than CPI growth, as someone at the manufacturing frontlines, he should see that PPI’s upward trend already lacked factual support. The difficulty was that no one could know when that 6,000-point high turning point for bulk commodity prices would appear.
But when Cui Bingbing returned, she countered Liu Jun: “All traders are still hoarding goods. Can’t they see this?”
“I’m also puzzled, so I’m very conflicted inside. But without demand to support it, crude oil might still have OPEC, iron ore has the two giants plus Vale – these two might be able to monopolize prices, but what about the others? Could bulk commodity prices also be approaching 6000 points? Could we hypothesize that current high prices are caused by shortages, while shortages are caused by trader hoarding, not manufacturers? Once hoarding reaches a balance point and traders discover demand has sharply decreased, hoarding becomes a hot potato swallowing funds – would there then be a devastating jump-off-building price escape? Grain, cotton, and soybean prices have already come down.”
“To be honest, as a manufacturing enterprise, considering these things is meaningless. Even if we assume prices will plummet the day the Olympics end, before the Olympics end, your raw material prices are in a constant upward state, and the upward momentum is crazy. High-interest borrowing to hoard goods can’t offset the rise. What do you do? Do you buy a batch of goods each month for these three months, each time at higher prices, or do you time it right and buy all three months’ worth at once to hoard, making a profit on raw materials first? Of course, you’d choose the latter. The problem now is you don’t even know if prices will hit a turning point, and if so, where that turning point is. But you’re not a trader. Traders can do nothing, waiting for rises or falls, but you ca n’t-you have orders, you need to keep a large group of workers busy. Regardless of current prices, you must buy materials according to the schedule. So you see, considering it or not considering it is the same. Though it does remind me of something.”
“Indeed, overthinking is useless. The expenditure for buying Hongming’s house disrupted my funding plan. Now I can only buy materials and ship goods according to schedule.”
However, following the schedule meant being helpless and unable to cope with the surging major trends. A precision processing business from an American client that Liu Jun thought was a sure thing, looking across China, who else but him, but after going through design, sampling, testing, and other procedures, just when it seemed like the final step, news came from America that they intended to cancel. Because the client discovered that current shipping costs were driven up by hot iron ore transportation on one hand, and were affected by crude oil prices reportedly racing toward $150 per barrel on the other. China’s original price advantage was completely swallowed by shipping costs. The price of importing from China was no better than importing from neighboring Mexico. Even though domestic processing fees were slightly higher, considering turnover cycles, domestic processing was already better than China. So why sign any contract?
Liu Jun had been hoping for a turning point in the crazy raw material prices. However, this turning point hadn’t arrived, but another turning point unexpectedly came, throwing Tengfei into complete chaos. The American client’s final cancellation was a dangerous signal, and also a natural turning point under current circumstances. This meant that foreign orders would not only disappear due to reduced foreign demand, but would also disappear from China due to foreign demand shifting away because of China’s lost price advantage. What’s called adding insult to injury – this was it. Historically, Liu Jun’s high-end processing capability heavily depended on exports, not only directly but also indirectly. His downstream clients often explicitly told him that buying from his Tengfei was a last resort, completely due to the high-quality export requirements. If his export side hit a critical turning point, how much better could his downstream clients be? Everyone was on the same rope.
Even though Liu Jun reacted quickly and rapidly adjusted production plans, his products still showed inventory buildup and backlogs. Various contract breaches followed one after another, overwhelming them. Luo Qing ran his legs off and shouted his throat hoarse over this, but faced with major trends, everyone was powerless to turn the tide.
Every day, the operating rate was lower than the previous day. Tengfei’s operating rate was even lower than Tengda’s. Quality always faced reverse elimination in any circumstance.