019: Preemption is monopoly
“stop! Where are you from?”
“It is called Woo Chan-soo, a popular unemployment. I’m here to see the governor.”
David should have already given me three letters of my name, so he will meet me.
“Did you promise?”
“I was supposed to meet you today at the Ulsan City Hall welcome party, but I have something to tell you in advance. Please tell it like this.”
“If you’re going to tell me in advance…”
“This nobleman… just conveyed it as it is.”
“Ah, yep! All right.”
In the 60s, is it better to be so condescending than to ask like a gentleman?
I looked out of the car window and the gate opened in an instant.
When I parked my car near the main gate, I contacted him through the intercom and he guided me to the president’s office.
**
“Umm, did you say Mr. Wu?”
“Yes, I came with an introduction from David.”
When I entered the president’s office, a large man greeted me.
I was introduced by David, but I don’t know if I was going to come see him in person.
“My name is Eric Marlton. nice to see you.”
“Nice to meet you. My name is Chan Su-wu.”
“I have heard a lot. Dr. David said it is Korea’s hidden brain.”
“Brain, that’s an overstatement.”
“I’ll take you this way.”
Marton treated me with respect.
Chocolate and strong coffee were set on the table.
It seems that David was quite friendly when he introduced me. It felt good to drink proper coffee after a long time.
“There is still time until the welcome party, so why did you come here?”
The tone was polite, but not a welcome sign.
Well, the initial factory, which was the only privilege, was also ruined, and sales in Korea were not great, so from the point of view of the branch manager, why did he come to Korea? It will be just a thought.
hey, you got it
I know you’re lucky to have met me.
“How difficult is the boss? I came to see you in advance out of concern.”
“You were worried about me?”
“sure. The US headquarters reprimands us every day for the poor return on investment in Korea, the US government asks us to participate in loans, and the Korean government asks us to hurry up the investment.”
“… ha… how did you…”
A look of bewilderment and wariness appeared on Governor Malton’s face at the same time.
It was only natural that I knew the secret situation.
“I came to know about it naturally as I did consulting for various walks of life while running a business.”
“I didn’t know there were lobbyists in Korea.”
Branch manager Malton treated me as a lobbyist.
“I decided to help Galfsa as a citizen of the Republic of Korea, not as a lobbyist.”
“Are you helping us?”
“sure. If we don’t help Galfsa now, isn’t it a risk that the entire investment in the Ulsan Industrial Complex will be stranded? Galfsa came to Korea as a spearhead of American investors.”
“Haha, the vanguard of investors. Well, let our company credo be to be a pioneer in the unknown. We want to be the Columbus of the 20th century.”
In terms of opening the way for overseas investment, whether or not Galfsa was a scam, it clearly contributed to the Korean industry.
Besides, since you met me in this history, you won’t be able to eat and run.
“Columbus of the 20th century. It’s similar to Galpsa in terms of discovering America and not making much money.”
“… how do we make money?”
It was a provocation, but the situation was so urgent that instead of getting angry, he asked a question. It must have been because of David’s introduction.
“Isn’t that why I came?”
“Do you know what our problem is?”
Branch manager Malton began to test my skills. Finally, the milling party began.
It was also a question to determine whether they were lobbyists or fraudsters.
“Where is the problem? Domestic demand in Korea is poor, exports to Japan are not easy, and even the first factory turned into a rag, so a new factory had to be built, so the loss must be insignificant.”
“haha…”
Governor Marton laughed.
He didn’t seem too upset yet.
Anyone can predict that much, right?
Hey, I’m an expert in this field!
Even from the 21st century.
“In addition, the quality of crude oil from the Middle East would have been a fatal blow. I tried to refining cheaply in Korea, where there is no pollution issue with cheap labor, and sell it to Japan at a high price, but the efficiency of the refining is terrible.”
“… her…”
The mid-1960s was a time when Japan was at its peak.
Galf wanted to sell various petroleum products to the Japanese market, but in terms of cost reduction, they tried to use Korean land as a production base.
However, as soon as I started the business, I ran into an unexpected problem.
The first is that oil refining companies have sprung up in Japan, making it difficult to compete on price.
The second was a technical problem related to crude oil quality.
East Asian countries, including Korea, geographically mainly buy crude oil from the Middle East. Middle Eastern crude oil has a lot of dregs compared to Texas oil from the US or Brent oil from the North Sea, so less gasoline or diesel is extracted, resulting in very poor profitability.
It was because Galpsa had neglected its business review.
It’s not for nothing that people say that localization is important in overseas business.
‘Of course, that difficulty is temporary.’
Only now, the taste of dying from Middle East crude oil, but through the 1970s, Korea’s economy grew rapidly, and Middle East crude oil became a jackpot.
Demand for low-grade petroleum products such as naphtha and asphalt has exploded, just as much as gasoline and diesel.
Thanks to this, Galfsa was able to sell its naphtha license to Japan at a high price.
So, now is a great opportunity to seduce Galpsa. You must not miss this time.
“Am I wrong?”
“No, I am amazed at how accurate it is. To be honest, I knew geographically that in East Asia, Middle Eastern crude oil had to be imported, but I did not expect that the proportion of heavy oil would be over 40%.”
Heavy oil is a low-quality crude oil component called bunker C oil.
At best, it is used as a fuel for ships, or as a lubricant or asphalt material.
Middle Eastern oil, represented by Dubai oil, has a high percentage of heavy oil components, accounting for as little as 40% to as much as 70%.
This is why Texas oil in the U.S. is brown and has low viscosity, while Dubai oil in the Middle East is dark and particularly sticky.
“I’m here to clear things up. Helping Galpsa is good for our country.”
In this day and age, being a patriot has always been a good excuse.
“Are you going to solve the problem?”
“Wouldn’t that be solved by raising the oil refining efficiency by about 5%?”
“… 5%?”
A 5% increase in refinery efficiency increases refinery sales by approximately 15%.
In order to raise the efficiency of refining to that extent, a large-scale investment of tens of millions of dollars is required, so in terms of net profit, it is calculated that it will increase by about 5%.
A net profit of 5% is a huge number for manufacturing.
“Of course, no investment is required.”
“Heh heh!! 2… 5% without investment… crazy!!!!”
At first, he looked just like that, but when he said he didn’t need an investment, Marlton stuttered.
There is no one who will not fall to this level.
**
“How on earth do you increase efficiency like that?”
“What are you in such a hurry for? Businesses need to align their interests. You don’t think this is free, do you?”
Branch Manager Malton deliberately corrected his posture and sat down.
“That… it is. what price do you want? I’ll have to listen to that.”
“I want two things. The first is the monopoly business rights for naphtha at the Ulsan plant, and the second is handing over the abandoned plant. Then we will increase the refinery efficiency by 5%.”
For my business to succeed, I need to monopolize naphtha from the Galfsa refinery.
No matter how much technology I have, I cannot make a product without materials.
Naphtha is also a raw material for synthetic resins, synthetic fibers, and synthetic rubber, but its range of uses is enormous enough to be used to make aspirin or saccharin.
Until the rise of semiconductors in the 21st century, ‘industrial rice’ was a word referring to naphtha.
Of course, I intend to use all of the naphtha to spin synthetic fibres. With the current production capacity of the Galfsa factory, it would be difficult to produce nylon and polyester.
“Are you saying you will buy naphtha exclusively and refurbish the plant?”
“That’s right.”
I’m going to spend all 200,000 dollars on repairs to the abandoned factory.
There’s no money to pay for the takeover of the factory.
“Even if you monopolize naphtha, customers buy it at market price, and the abandoned factory is for sale, so if the refinery efficiency goes up by 5%, we should be happy to offer it.”
“Then, the deal was established with this.”
“But, isn’t the most important prerequisite is that the technology exists?”
Marton, whose excitement had subsided a little, started talking in detail.
“If you sign a contract, I will show you right now. If my words are false, I will tear up the contract right away. No, you can specify the technology as a condition of the contract.”
I said emphatically.
You should never reveal your skills before signing a contract. It’s like holding the hilt upside down.
“… Thank you for showing me the demonstration right away…”
“I made it clear that if you sign a contract.”
I buried myself deep into the sofa as Marton squirmedly tried to get up. Marton also pointed out the last item right before the contract.
“…Everything is good, but it is difficult to have a monopoly on NAFTA. Do it preemptively, not monopolize. A monopoly means that if a customer cannot digest it, we have to throw away the naphtha we produce.”
“good. Let’s do it first.”
I can fully understand why Marton would do this.
Nafta has a wide range of uses, so the technology to deal with it is formidable.
It is a very volatile substance, so it is difficult to transport and store, and it needs to be decomposed/quickly cooled/compressed/separated/purified to use it properly.
That is, once naphtha is broken down, it must be made into a product, whether it be rubber, fiber, or aspirin.
I can’t save it anywhere after writing it.
This is the reason why there are many factories for related products gathered around the naphtha plant.
Even the factories are so closely connected that industrial water and electricity are shared.
It is also called a combinat (combined production) type industry because how densely clustered the factories are has a great influence on the cost of the final product.
In other words, since naphtha is difficult to bring or take from afar, naphtha from Ulsan must be used in the Ulsan complex.
“… keuhmm… if it is first, it means that we will supply Mr. Wu and sell the surplus naphtha elsewhere. I want to make this clear.”
“You just need to guarantee me priority.”
There will be no NAFTA to sell to others.
So preoccupation is monopoly.
After going through the Vietnam War, demand for naphtha across Asia exploded.
So, in the 1970s, Japan bought the Ulsan plant’s naphtha license at a high price.
“You have to get the preemption right, of course. You said you could handle the surplus.”
In fact, oil refiners need to sell off petroleum products that are difficult to collect, such as naphtha, to build a solid profit structure.
If this contract is made, Galf will not have any concerns about losing money in naphtha sales.
“By the way, how much is Galpsa production, so are you worried about the surplus? I’m not trying to run a naphtha business on a small scale.”
If you want to win a big shot in poker, you have to ask when your opponent believes in his hand and bounces his guts, and go for a double.
In this case, it is an easy case that only needs to increase the quantity.
“Well? Are you talking about the production capacity of this factory? 7 million tons of crude oil are refined a year, and the corresponding naphtha production is 90,000 tons.”
‘Was it only 90,000 tons per year?’
I was dumbfounded by Marton’s boastful words.
Since it was in the 1960s, I expected that the production would be small, but I did not know that it would be less than 100,000 tons per year.
Even at the end of the 1980s, annual consumption in Korea exceeded 1 million tons, and by the end of the 1990s, it would exceed 3 million tons per year.
“90,000 tons? At that volume, how much is the naphtha selling price?”
“The price of naphtha is $20 per ton. The annual purchase cost is $1.8 million. By no means, on a small scale.”
‘OMG? Is naphtha that cheap? $20 per ton?’
In the 21st century, the price of naphtha went up to 1,000 dollars per ton, so plastic was said to be worth gold, but only 20 dollars?
It’s too cheap even considering inflation.
Come to think of it, the oil shock hasn’t come yet.
It was a time when crude oil prices were chewing gum.
Taking over the abandoned plant for free and acquiring the right to preempt naphtha is a successful contract, and even the price of naphtha is cheap!
My heart raced, but I pretended to be calm.
“If you agree on the naphtha price, let’s sign a contract.”
Marton, the branch manager, hurried to sign the contract, as if he had read my surprised expression at the absurdly low selling price.
