Chapter 228: The New Ship Purchase and Shipyard Construction Plan
Yang Wendong was not personally familiar with the operational intricacies of running a supermarket, so when it came to the launch of Carrefour, he had to rely entirely on Liu Huayu and his team, who had prior experience working with Walmart.
His management philosophy had now become quite clear: identify the industry direction, invest capital, recruit professionals, and provide overarching guidance based on his own understanding. This strategy had served him well across multiple ventures.
Now that the supermarket direction had been set, all that remained was for the team to build the framework. Once the foundation was in place, Yang Wendong planned to step in and offer suggestions with the benefit of his knowledge from the future.
Still, past life experience did not guarantee success. Even Liu Huayu's experience from the U.S. market might not translate perfectly to the Hong Kong retail scene. Everything would have to be tested, errors made, and improvements found through trial and error.
Being the first mover in any market meant facing many challenges, but the benefit was clear: greater experience and the prestige of being a pioneer.
After coming down from the top floor of Jili Tower, Yang Wendong arrived on the sixth floor, the headquarters of Changxing Shipping.
"Mr. Yang," Zheng Yuhua greeted him immediately, having already been notified of his arrival.
"No need to be so formal." Yang Wendong smiled. "I'm just here to catch up on the current state of Changxing Shipping and your plans going forward."
"Understood. I've already prepared the financial data from the first half of the year," Zheng Yuhua replied. "Please give me a moment to retrieve the report."
A staff member soon brought over tea and fruit, and a few minutes later, Zheng Yuhua returned with a thick folder in hand.
"Mr. Yang, these are the financial statements for the first half of the year. Please take a look."
"Thank you." Yang Wendong accepted the document and began reading through it.
Zheng Yuhua explained, "We've depreciated the cost of purchasing our cargo ships over three years, so the acquisition expenses are factored into the financials accordingly. After subtracting that, as well as operational costs like crew wages, fuel, and maintenance, we made a profit of HK$1.12 million in the first half of the year."
"HK$1.12 million? No wonder people say shipping is a high-margin industry." Yang Wendong nodded. "And that's even after factoring in depreciation. Looks like it only takes two years to make back the cost of the ship."
Although on paper the profit didn't match what Changxing Real Estate was pulling in, that was only because real estate used high bank leverage and Yang Wendong himself had the advantage of foresight.
Under normal circumstances, shipping margins would far exceed real estate. After all, his foreknowledge didn't give him much of an edge in shipping.
"That's right," Zheng Yuhua said. "Which is exactly why so many large capital groups want to get into shipping. But our profitability is still better than most of our competitors."
"How so?" Yang Wendong asked.
Zheng Yuhua replied, "Firstly, our seven secondhand cargo ships were bought at incredibly low prices. When you spread that cost out, the initial investment per ship is significantly reduced, which boosts profitability."
"True." Yang Wendong nodded. "But we probably won't get that lucky again. Any future secondhand ships we buy will likely be at market price."
"Exactly," Zheng Yuhua said. "Secondly, we benefit from the consistent orders from Changxing Industrial. Even though we offer them discounted rates, stable business is always worth giving discounts for. Stability still brings in profit. And because luggage boxes are bulky but light, I've been pairing those shipments with heavier freight, which we get paid a premium to carry."
"Haha, that's a real advantage," Yang Wendong said with a chuckle.
Freight shipping, like trucking, wasn't profitable if the cargo was either too heavy or too light. The trick was in the balance. Most cargo ships focus on optimizing for weight capacity, which meant space-occupying, heavy goods weren't popular. But with their own unusually light products, Changxing Shipping had the perfect opportunity to take on those heavy goods and fill in the weight gaps profitably.
Zheng Yuhua pointed out, "The latter pages of your folder show the operational status of each ship."
"Alright." Yang Wendong flipped through the pages. While he wasn't an expert, Zheng Yuhua's reporting was clear, especially on revenue and expenditures.
He wasn't worried about false data either. Changxing Group's internal auditing office reviewed all company financials, and Yang Wendong would occasionally bring in third-party accounting firms for spot checks.
If anything suspicious turned up, the consequences would be serious.
To ensure accuracy, technical spending data was sometimes confirmed with industry insiders.
After skimming the report, Yang Wendong commented, "The numbers seem fine, but our maintenance expenses look high."
"They are," Zheng Yuhua acknowledged. "Our fleet is entirely composed of secondhand ships. We must spend heavily on maintenance to avoid any problems. A breakdown at sea would be catastrophic."
"Agreed," Yang Wendong nodded.
Older ships meant higher maintenance costs, slower speeds, and increased fuel consumption. But those were expected. The real nightmare was an at-sea breakdown.
Like with commercial aviation, shipping schedules, routes, and estimated arrival times were meticulously planned and reported to international shipping organizations to help ports coordinate.
If a ship broke down mid-journey, those plans would collapse, and emergency rescue missions could be costly. Worse, many of their cargos were tied to contracts—missed delivery deadlines would mean massive penalties and would damage the company's reputation.
Even though such incidents were rare, the risk was too great to ignore. One major mishap could bankrupt the company.
"That's why we budget generously for maintenance," Zheng Yuhua explained. "Before every voyage, our ships undergo a full inspection at a local dockyard. It's not cheap, but it's necessary."
"If the money needs to be spent, then spend it," Yang Wendong said. "That's the trade-off for buying secondhand. It's just the price we pay for saving up front."
He paused, then added, "Last time, you suggested buying new ships—was that also due to these concerns?"
"Yes," Zheng Yuhua confirmed. "New ships come with 6 to 10 years of factory warranty. Much less risk. Also, I've been approached by some Japanese firms interested in chartering ships."
"Chartering ships?" Yang Wendong was well aware that in this era, most Hong Kong shipowners made their profits by leasing out their vessels.
However, most of those leases were short-term — only figures like Bao Yugang were unique in promoting long-term charter models.
Zheng Yuhua explained, "Yes. I've maintained a lot of connections with Japanese shipping companies. They rarely buy their own vessels — they rely mostly on charters."
"What kind of rates are we talking about?" Yang Wendong asked, intrigued.
Zheng Yuhua replied, "That depends on the vessel type. In recent years, a cargo ship costing around one million USD could be leased to Japanese firms for between 600,000 and 700,000 USD."
"That high?" Yang Wendong was visibly surprised.
Zheng Yuhua explained, "It sounds high, but shipowners are responsible for all operations — crew wages, vessel maintenance — everything. Japanese companies don't touch those responsibilities. In fact, if something goes wrong during transit and causes delivery delays, we're hit with heavy penalties. So Hong Kong shipowners are very careful and don't dare to use overly old ships for these contracts. Japanese clients are very particular — they won't settle for cheaper, secondhand vessels just to save on rent."
"I see." Yang Wendong nodded. "So the real profit for Hong Kong shipowners comes from controlling their operational costs."
"Exactly. The better the cost control, the higher the profit margin," Zheng Yuhua affirmed.
"Is this market saturated yet?" Yang Wendong asked.
"Not at all," Zheng Yuhua replied. "New ships are still in high demand. Global economic development is outpacing new shipbuilding. If we had new ships right now, they'd be chartered immediately."
"Alright," Yang Wendong said. "Get in touch with the Japanese shipyards. Let's look into purchasing new ships."
Only six years remained until the crisis in the Middle East would erupt. Once the Suez Canal shut down, shipping prices would skyrocket.
The Europeans would foot the bill for global transport. This opportunity was even greater than the real estate crash of 1966. And the profits — all in hard cash — would sync perfectly with a recovering property market, enabling the conversion of shipping profits into real estate investments. A perfect match.
"Understood." Zheng Yuhua nodded. "How many vessels should we look at, and what type?"
Yang Wendong replied, "That depends on how much we can borrow from both Japanese and Hong Kong banks, and how negotiations go with the shipyards. For now, let's start with bulk carriers. Even if we can't lease them out, we can use them to ship our own cargo."
"Got it. I'll start sending signals to the Japanese yards and let them come to us," said Zheng Yuhua.
"Do Japanese shipyards build container ships?" Yang Wendong asked.
"They do," Zheng Yuhua replied, "but they're not suitable for us yet. Some ports globally have started container loading and unloading, and it's clear this is the future of shipping. But to support container operations, ports need massive new infrastructure. Many existing ports can't even be retrofitted — they'll need to be replaced entirely. That kind of investment is huge. Right now, the global reality is that most ports still use traditional loading methods. If we buy a container ship now, we'll only be able to lease it to a very limited number of cities. That's not good for our business."
"Good point." Yang Wendong agreed. "Even Hong Kong hasn't made any serious moves toward containerization."
In fact, the issue wasn't just financial. It was also political. The existing dock systems employed thousands. Any radical changes could cause massive unemployment and unrest. Even in wealthy Western nations, governments were reluctant to overhaul their ports, opting instead for slow, cautious upgrades.
Even though everyone understood containerization was the future, dock workers didn't care. Take Britain, for instance. It had one of Europe's largest shipping industries. But when the government tried to shift to container systems, massive strikes by dock workers forced a halt. As a result, Britain missed the wave, and Rotterdam became Europe's biggest port instead.
Zheng Yuhua added, "Don't worry, Mr. Yang. Shipbuilders and many shipowners already see the trend. So most of the new bulk carriers are designed to be convertible to container ships. While they won't be as efficient as purpose-built container ships, they'll work for both purposes."
"That's good. Very good," Yang Wendong said with a nod. "Let the Japanese side know we're in the market for new vessels. But we'll continue buying secondhand ships too. Once Changxing Industrial's plant in Kwun Tong starts operating, we'll need a lot more shipping capacity."
"Understood," Zheng Yuhua said. "Over the past six months, I've already found five secondhand vessels. I'll speak with their owners and send you the information once I've negotiated the basic terms."
"Alright," said Yang Wendong. "Just make sure the quality's up to par. Even if it's for Changxing Industrial's internal use, we can't afford late deliveries. They've got their own clients, too."
"No problem. I'll make sure quality is the top priority," Zheng Yuhua promised. Then he paused and said, "Mr. Yang, I actually have another proposal. It's a bit ambitious and would require more investment."
"What is it?" Yang Wendong asked.
Zheng Yuhua said, "You've mentioned before that we'll be heavily investing in shipping. That means we'll eventually own a large fleet — especially with Changxing Industrial's rising demand, and more secondhand ships to maintain. The problem is ship repairs and upkeep are expensive and slow. Hong Kong only has a few shipyards, and we often need to wait in line. So I'm thinking, why don't we build our own shipyard?"
"Our own shipyard?" Yang Wendong pondered for a moment. "Roughly how much would that cost?"
Zheng Yuhua replied, "That depends on land costs. Shipyards need to be near deepwater ports, which are extremely scarce. Alternatively, we'd have to reclaim land — that's expensive. As for building the shipyard itself, we're talking around HK$10 million. A smaller facility could be done for a few million. We can always expand later as our fleet grows. But the key is securing the right land early."
"So the real challenge is getting land suitable for a dry dock or slipway near deep water?" Yang Wendong asked, thinking aloud.
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