Chapter 54
Chapter 54
Translation: Godtl
Investing for hedging purposes or speculative purposes—that's what derivatives are.
Derivatives are often called a zero-sum game.
It means one of the two parties must lose.
That's why people usually don't trade alone.
They join hands with others, devise strategies, and target specific positions to execute their plans.
Countless people have lost their entire fortunes to these forces, yet no one can ever know who these forces truly are.
Moreover, futures trading allows up to 10x leverage for retail investors, meaning potential profits can skyrocket—but conversely, losses can be equally staggering.
This is precisely why some people end up with hundreds of millions in losses when they misstep in futures trading.
Most cases of people jumping into the Han River due to failed investments stem from derivatives.
Because of this extreme risk, it's generally recommended to invest in ETFs rather than directly trading futures or options.
"In the case of oil futures, the daily global trading volume currently ranges from hundreds of billions to trillions of won. But as you know, oil prices have been continuously falling. So trading volumes have significantly decreased."
To trade futures in Korea, one must go through a securities firm, which purchases contracts from the CME, the world's largest futures exchange.
While futures exchanges operate actively 24/7, they don't see the same daily movement of hundreds or thousands of trillions like the FX market.
Even oil, which has relatively high trading volume among commodities, barely reaches trillions of won in daily transactions.
"Handling 2 trillion won in a single go would be impossible, right?"
"Yes. If we were to dump 2 trillion won all at once here, the CME would immediately halt trading."
Because of this, attempting to buy oil with 2 trillion won in one go would send massive shockwaves through the market, prompting the CME to label it as market disruption and freeze trading immediately.
"So the only way is to split the purchases. Spread them out over several days. If we do it this way, we should be able to absorb the 2 trillion won volume somehow."
When it comes to futures, the first thing that comes to mind is leverage.
In the stock market, retail investors typically get 2x leverage, while securities firms can go up to 3x. But futures are different.
Retail investors can apply leverage of 10x or more.
What about securities firms?
Securities firms can also use leverage, but once the amount exceeds hundreds of billions, they get rejected.
Of course, no institution offers leverage in the trillions.
Even with impeccable credit, trillions far exceed risk management thresholds.
If a broker were to approve trillion-won leverage and face forced liquidation, the broker itself would risk bankruptcy.
"We've been buying within the $40 range to prevent price collapses... but even with our purchasing volume, prices keep falling. Just today, we bought at $38."
"Rumors say there aren't many buyers for oil right now, so tankers full of crude are just drifting aimlessly at sea."
"Storing it in facilities costs an exorbitant amount per day in fees."
Dig here, dig there—nothing but oil keeps coming out.
Storing oil in facilities incurs such high fees that it's cheaper to just keep it on tankers and let them drift.
"If this continues, everyone will just trade futures while barely anyone actually takes delivery, and prices could drop to the $20 range."
"Our research team analyzed it too—unless a major war breaks out, it seems impossible to clear this massive oversupply."
"What about the possibility of OPEC cutting production?"
OPEC—the Organization of the Petroleum Exporting Countries—comprises oil-producing nations, including Saudi Arabia.
"Production cuts have been discussed for a while. But even if they do cut, most analysts believe the impact won't be significant."
"On top of that, the member countries have been snarling at each other lately—it's complete chaos. Most analysts believe they're too busy fighting to even sit down for production cut negotiations."
The report I'd seen earlier was essentially just a contingency plan for worst-case scenarios.
Logically, with this much oil flooding the market, production cuts to slightly boost prices would be ideal.
The problem was that OPEC members were currently at each other's throats—whether they could even come to the negotiation table was questionable.
Even if by some miracle they did negotiate, clashes were inevitable, and most experts predicted any cuts would be negligible in volume.
This was precisely why oil prices remained stuck in the gutter.
'This is slightly terrifying.'
Seeing everyone react this way made me nervous too.
If oil prices truly crashed further, we'd lose every penny we'd put into futures contracts.
The bigger issue was that we were injecting 2 trillion won in staggered intervals over days, making it impossible to liquidate our positions all at once.
"..."
Yet the production cut scenario report I kept by my side still gleamed with undeniable promise.
"Keep buying. Until we've deployed the full 2 trillion won."
＊＊＊
Do you know how much oil South Korea consumes daily on average?
Approximately 2.5 million barrels.
Yet here we were, with 13 million barrels of oil arriving at port.
Though it was bunker fuel for container ships, in pure oil terms, this was enough to comfortably supply the entire nation for five days.
We'd pooled every available company fund, pouring in about 600 billion won to achieve this.
"Renting five storage facilities should suffice. Three are already full, and the remaining two are being filled as we speak."
"..."
As he listened to the report, President Kim Du-yeong felt unease creep over him.
He had no idea what they were even doing anymore.
Following the golden rule of unquestioningly obeying Director Jeong's orders, they'd mobilized all funds to buy oil.
But the more he thought about it, the less sense it made.
Thirteen million barrels.
A single large container ship consumes about 1,500 barrels of bunker fuel daily.
This stock alone could keep one running for 24 years.
Even with ten mega-container ships, it'd last 2.4 years.
An utterly staggering quantity.
Bunker fuel—primarily used for large container vessels—contained more impurities and was lower quality than crude, hence cheaper.
While crude traded at $40, this could be secured at around $35 per barrel.
"Frankly, sir, we're probably the only ones spending 600 billion won to buy this much bunker fuel instead of crude."
"At least we won't have oil supply worries. The real issue is having no work. This stock will just rot in storage for years."
"And prices keep plummeting in real-time... pure creative destruction at this point."
"With our remaining funds at rock bottom and hardly any projects, we're heading straight back to Hanjong's darkest days. Just piling debt higher."
Even the staff were growing skeptical.
No—they'd been skeptical from the start.
Though these were orders from above, they silently blamed President Kim for not pushing back against such decisions.
"..."
Kim remained slumped in his chair until quitting time, staring blankly into space.
All he'd accomplished since returning to the company was buying bunker fuel for days on end.
Nothing else.
Efforts to secure contracts failed spectacularly—China snatched everything, leaving them twiddling their thumbs.
Meanwhile, they'd burned through all capital meant to sustain the company.
Five trillion won from bond sales, plus the remaining one trillion in reserves—completely drained.
All that remained was oil.
Why on earth would Jeong Jin-ho order such a thing...?
"Chairman!!"
At that moment, the vice president came bursting into the chairman's office in a flurry.
"Wh-what's going on? You didn't even knock."
"Ah, my apologies. But the matter is extremely urgent."
"What on earth happened?"
"OPEC just announced—they're cutting production to raise current oil prices!"
Hearing this, Chairman Kim Du-yeong wasn't particularly shocked.
Production cuts—well, they'd done that a few times before.
Moreover, the reduction wasn't significant enough to raise prices by much.
"This time it's on a completely different scale. OPEC's official stance is to raise oil prices to $60 per barrel."
"What?"
Now that was surprising.
No—it was downright shocking.
"$60?! What's the current price range?"
"It's been fluctuating between $38 to $40, so they're essentially raising it by nearly 50%."
"Wait. To achieve that, how much are they planning to cut production?"
"Everyone's estimating at least a 30% reduction."
At least 30%!
It was the largest production cut in history.
And the problem was—that was just the minimum.
"As soon as the announcement dropped, oil prices started skyrocketing. They've already broken past $50."
"...!"
In the shipping industry, oil prices account for about 50-60% of operating costs.
Higher oil prices directly translate to tougher conditions for shipping businesses.
Consequently, shipping rates fluctuate with oil prices, leading customers to seek out the cheapest options.
But until now, oil prices had been low.
Which meant operating costs were cheap too.
China had taken it a step further by offering customers even lower rates than anyone else.
"But if prices surge this much..."
"Even China won't be able to hold out. This might really hit $60."
China had been deliberately operating at a loss to dominate the Chicken Game. But now, with the most critical factor—oil prices—suddenly spiking?
This was an insurmountable disaster.
"And on the flip side, we're practically drowning in oil reserves, aren't we?"
Chairman Kim Du-yeong's mind began racing.
"Vice President. Gather all the executives immediately. Even if they've already left for the day, call them back. This is our moment. Open all lines—we need to sweep up contracts by offering the cheapest rates in the market."
"Ah, yes sir!"
For the first time in a long while, Chairman Kim Du-yeong felt his blood boiling.
The surge of dopamine was so intense he could barely feel his head, it was buzzing so hard.
He'd thought they were backed into a corner.
Who could have predicted such a reversal?
Honestly, who could have imagined OPEC would make such a crazy decision?
No—probably no one saw this coming.
Except for one person: Jeong Jin-ho.
'Just what kind of person is he?'
How could that man have foreseen this crisis?
And even if he had, how many people in the world would dare to order the purchase of billions worth of oil reserves?
'So that's why he emphasized those rules.'
The first rule:
Trust Deputy Director Jeong Jin-ho's words completely.
The second rule:
Remember the first rule.
'I won't doubt you again.'
Chairman Kim Du-yeong engraved those rules into his heart once more that day.
＊＊＊
"Just the other day, he was moping about how he had nothing to do as chairman. Now? He's probably the busiest man on the planet."
"Chairman Kim Du-yeong?"
"Yeah. Oil prices are surging at an insane rate. Even China, who'd been stubbornly holding out to monopolize the Chicken Game, finally threw in the towel. Their prices became unsustainable, so they had no choice but to raise them."
"Meanwhile, we kept ours the same?"
"No—we actually raised ours a bit. But even then, Gwangun Shipping's rates are still the cheapest. So now, contracts are pouring in from everywhere."
Thanks to that, Chairman Kim Du-yeong, despite being swamped to the point of having no time to breathe, has reportedly been grinning from ear to ear.
"That guy mentioned he wanted to have a meal with you sometime. He said if it weren't for your order to buy oil, they would've been forced to shut down for good."
"Why didn't you bring him along?"
"Keukeu. Like I said, he's the busiest man in the world right now. Contracts are pouring in like crazy, and he's struggling to figure out how to handle them all."
Shipping companies don't operate vessels directly.
They usually charter them—that is, rent the ships.
The problem was that as contracts started flooding our way, the volume became far too much for Gwangun Shipping to handle alone.
"So I hear they're considering linking up with Daegwang Shipping. We'll take the contracts and pay them a commission fee—a slightly higher one."
"Do you think they'll accept?"
"What choice do they have? Even if it's expensive, they'll have to take it. Right now, Gwangun is sweeping up all the work—if they don't take jobs from us, they'll have to shut down too."
Gwangun Shipping currently has over 13 million barrels of oil in storage.
The storage costs might be a bit steep, but...
If we sweep up all that work and keep sending out ships, would that really be a waste?
"They say if we manage it well, we could easily make three to five times the investment back. Well, that is, if crude oil prices hold up until then."
Currently, oil prices have broken past $50 and are racing toward OPEC's target of $60.
Since we invested 600 billion won, even just tripling that would bring us close to 2 trillion won.
"They said they'd fix the minimum price at $60, so for now, they'll probably keep adjusting production cuts to balance supply."
"So Gwangun Shipping just has to sit back and rake in the money?"
"Yes. Honestly, I wish prices would go even higher... but if that happens, it'll create too many problems, so OPEC will likely try to hold it at $60 as much as possible."
That was a bit disappointing.
Why stop at $60? Why not push it to $70?
But with so many conflicting interests at play, even $60 was an extreme choice.
Isn't the whole world already in chaos from the sudden spike in oil prices?
Just look at the shipping industry alone.
If China is waving the white flag and screaming, you know the situation is serious.
On top of that, gas stations in our country have been quick to jack up prices too.
"Gas stations are no joke right now. They're trying to push prices up to 2,000 won per liter."
The shock has driven prices abnormally high, but they'll stabilize eventually. Until then, we need to close our positions.
"You haven't sold everything yet, right?"
"No. Once the right selling window comes, I plan to gradually release the volume."
Unlike the FX market, where you can dump billions in one go, we have to sell in portions. And our target price is $60.
"So that's nearly 1 trillion won in profit."
"Probably around that, yes."
"Hah..."
Hyungnim shook his head and downed his drink.
Truthfully, once you hit the hundreds of billions, squeezing out high returns gets harder and harder.
There aren't many places that can handle that kind of money, and even FX has low volatility these days.
"But you put in 2 trillion and still pulled off a 50% return..."
We've already recouped the money we used to buy Gwangun Shipping's shares.
"This isn't some cashback deal, damn it."
"Right. Guess the Middle Eastern brothers gave us a cashback, huh? Haha."
At my little joke, Hyungnim chuckled and refilled my glass.
"I'm a really lucky man. If it weren't for you, the company wouldn't have grown this much."
"Well, I only got this far because you pulled me up, Hyungnim."
"You would've made it big one way or another, even without me."
The sudden praise made me think he had something else to say.
"Hyungnim. You've been acting serious for a while now—what's on your mind?"
"Guess we've known each other long enough. You always see right through me."
Hyungnim drained his glass and stayed silent for quite a while.
"Jin-ho."
"Yes."
"I've been thinking about this for a long time."
I smiled and flipped the meat.
"What is it?"
"You... want to be CEO?"
My hands froze mid-flip as I stared at him.
"My seat—you should take it."