Glory of Modern Coal Chemical Industry

There is an important transformation of supply-side structural reform and high-quality development inside, and there is a major change that has not occurred in a century outside. Both internal and external factors work together. At the fifth plenary session of the 19th Central Committee of the Communist Party of China, this historic transition was solemnly demarcated and solemnly announced at the right time.

Time is a melting pot, refining the essence and settling the dregs, which is reflected in the development of modern coal chemical industry. During the "13th Five Year Plan" period, China's modern coal chemical industry experienced more than a decade of bustle before, and under the pressure of the falling international oil price market, the dust settled in the industry, entering a stage of differentiation and development where internal skills were hard studied and the rough and refined were eliminated. A group of high-quality development pioneer enterprises emerged and entered a fast lane of development that was completely free from dust. Among them, Ningxia Baofeng Energy Group Co., Ltd. is an outstanding representative. Several modern coal chemical production lines with high global standards have been put into operation, adhering to green manufacturing, and becoming the first modern coal chemical listed company with a market value approaching 100 billion yuan in China. Based on Ningdong and taking a global perspective, the company has successfully climbed to the top in the rapid development of China's modern coal chemical industry. "The 13th Five Year Plan" has become a precious and glorious journey for Baofeng Energy.

Enterprises are the main body of the market, as well as the main carrier to represent the country in international competition and demonstrate national strength. The absolute principle of enterprise development is that the country needs to be prosperous and strong, and society needs to progress.  

Changhuai Industry has a childlike passion for serving the country, holds high the banner of revitalizing national industry, and is based on China's rich coal, oil, and gas resources endowment. Focusing on the practical need to ensure the safety of national energy and raw materials, with a circular economy model as the core, and green and intelligent development as the wings, it has explored a new path for the clean utilization of coal with Chinese characteristics, creating a leading enterprise in high-end coal based new materials with outstanding technology and the world, This is the unswerving purpose and adherence of Baofeng Energy. During the "13th Five Year Plan" period, especially in 2020, under the adverse environment of low oil prices and product price fluctuations, China's coal chemical industry once fell into a dormant downturn. However, Baofeng Energy burst into a steady stream of vitality, creating a development miracle in reverse.

Due to the fact that naphtha to olefins is still the mainstream process worldwide, the prices of polyethylene and polypropylene have a certain correlation with the price of crude oil. In the second half of 2014 and the end of 2015, the overall price of crude oil fell, with a significant decline of over 70%. During this period, the prices of polyethylene and polypropylene in China fell from a high point of nearly 12000 yuan/ton to below 8000 yuan/ton. At the end of 2015 and 2017, along with the rise in international crude oil prices, the prices of polyethylene and polypropylene also corrected by more than 9000 yuan/ton. In 2020, international oil prices experienced an epic dive and hovered at a mid to low level of over $40 per barrel.

Under the influence of the petrochemical price system, during the "13th Five Year Plan" period, China's modern coal chemical industry achieved large-scale growth, but in addition to the stable profits achieved by outstanding coal to olefin enterprises, the industrialized modern coal chemical routes such as coal to oil, coal to gas, and coal to ethylene glycol generally remained only on the line of marginal profits and even losses.

The vicissitudes of the sea make it even more heroic. It is against this industry background that Baofeng Energy has handed over a brilliant "13th Five Year Plan" transcript. In 2015, when the "12th Five Year Plan" ended, the company had total assets of 26.264 billion yuan, revenue of 7.081 billion yuan, total profit of 1.684 billion yuan, and actual tax payment of 252 million yuan. At the end of the "13th Five Year Plan", despite the impact of the COVID-19, Baofeng Energy is still facing difficulties, and the momentum of rapid development is increasing instead of decreasing.

According to the company's cutting-edge periodic reports, in the first three quarters of 2020, the company's total assets were 36.689 billion yuan, an increase of 10.19% compared to the end of the previous year; The operating revenue was 11.299 billion yuan, a year-on-year increase of 15.93%; Net profit was 3.152 billion yuan, up 11.27% year-on-year; The net cash flow from operating activities was 3.708 billion yuan, up 57.76% year-on-year. The company's existing production capacity includes: 7.5 million tons/year of coal, 11 million tons/year of coal washing, 4 million tons/year of coke, 4 million tons/year of methanol, 600000 tons/year of polyethylene, 600000 tons/year of polypropylene, 780000 tons/year of fine chemicals, and more than 13000 employees. In the company's main business, the production scale of polyolefins and the resulting operating performance have successfully doubled from 2015. At the same time, this year, with the launch of the 3 million tons/year coking multi-production project, the clean production capacity of the company's coking business has almost doubled. This is the speed and achievements of Baofeng, which are well known in China's coal chemical industry.

Since the entry of the modern industrial revolution, the West has led the process of human industrial civilization, initiated by China and developed a major basic industry. However, in the field of modern coal chemical industry, Chinese physical enterprises have become outstanding representatives worldwide. After nearly 20 years of continuous cultivation and exploration, China's modern coal chemical industry system has become increasingly abundant and flourishing in scale, becoming a unique and beautiful business card for China's chemical industry, a growing force in the global chemical industry that cannot be ignored, and an outstanding representative of China's advanced and high-end manufacturing industry.

When the wild geese array crosses the sky, there must be a leader; When the horses gallop, they should hold their reins. The rise and growth of an industry is undoubtedly accompanied by the exemplary role of leading enterprises. In a sense, the significance of leading enterprises for an industry lies in "defining" the industry by benchmarking. For the emerging Chinese modern coal chemical industry, in its early stages of development, the industry was mainly defined by the first batch of central and state-owned enterprises entering the energy sector. As the development of the modern coal chemical industry during the "13th Five Year Plan" period enters the middle stage, a group of extraordinary private enterprises have emerged in adversity, more and more shouldering the responsibility of defining industries. Baofeng Energy is an outstanding representative of China's modern coal chemical industry defined by the "13th Five Year Plan".

The "Golden Triangle" of energy and chemical industry (Ningdong Yulin Ordos) is the core area of China's modern coal chemical industry. Baofeng Energy entered the Ningdong Energy and Chemical Base in 2006, and is one of the earliest enterprises to enter the Ningdong Base. Baofeng Ningdong Base is planned to cover an area of 14000 mu, adhere to the development path of scale, integration, high-end, self-sufficiency of raw materials, and product differentiation, build a circular economy industrial cluster that integrates "coal, coke, gas, methanol, olefins, polyethylene, polypropylene, and fine chemicals", achieve the quality, classification, cleaning, and utilization of coal resources, and truly extract coal resources, More than 100 types of high value-added chemical products have been produced instead of petroleum.

During the "13th Five Year Plan" period, Baofeng Energy has built or planned multiple industrial production lines with firm confidence and forward-looking vision, making it a powerful carrier and proof for defining China's modern coal chemical industry. In 2016, the construction of the Baofeng Phase II 600000 tons/year olefin project (hereinafter referred to as the Phase II project) was officially launched to build a global large-scale coke oven gas and coal to gas combined olefin production unit.

In October 2019, the methanol to 600000 tons/year polyolefin project, the later stage of Baofeng Energy Phase II project, was completed and put into operation, doubling the company's polypropylene and polyethylene production capacity. Among them, the polyethylene device of the project adopts the Chevron Phillips double loop slurry process, which can produce bimodal polyethylene products and metallocene polyethylene products. Currently, the import dependency of bimodal polyethylene products is above 50%.

In June 2020, the 2.2 million tons/year methanol project in the first phase of the second phase project was successfully started at one time, and the entire line of the project's front and rear sections was connected. It is particularly worth mentioning that in the 2.2 million ton/year coal to methanol project, the use of a single set of 2.2 million ton/year methanol synthesis tower with a relatively large production capacity in the world, a larger domestic 105000 standard cubic meters/small space unit, and a larger methanol scrubber in the domestic coal chemical industry have consolidated the material foundation for Baofeng to define China's modern coal chemical industry.

Devices are changing and technology is changing, but what remains unchanged is Baofeng Energy's adherence to "clean, low-carbon, and safe". Since its planning and construction, Baofeng Energy has always regarded safety and environmental protection as the "lifeline", striving to achieve coal mining without seeing coal, water without drainage, and dust without falling. During the "13th Five Year Plan" period, Baofeng Energy's coal to olefin production capacity doubled, but its total profit increased nearly threefold; Awarded as a "guiding benchmark" in the energy efficiency of coal to olefins in the petroleum and chemical industry in 2019, and a national "green factory", it has become an outstanding example of the intrinsic excellence and external beauty of coal chemical enterprises.

In line with the trend of industrial chain extension and product differentiation and high-end development, Baofeng Energy has also made a positive layout in the "13th Five Year Plan". Relying on advanced devices and technological advantages, Baofeng Energy also continues to accelerate innovation, improve the high-end differentiation level of its products, and strive to reduce the external dependence of China's polyolefin products. Since this year, Baofeng Energy has successfully launched 10 new brand products, including thin-walled injection molding, high-density polyethylene hollow materials, high-strength bimodal film materials, and linear polyethylene special materials for weather resistant greenhouse films, which have brought in revenue growth and also promoted the upgrading of products in China's modern coal chemical industry.

Baofeng Energy also has extraordinary innovation in the layout of new energy. In April 2020, Baofeng Energy invested 1.4 billion yuan to start the construction of a currently large-scale global demonstration project for solar energy electrolysis, hydrogen production, energy storage, and comprehensive application in the Ningdong Base. At the same time, we will expand the application field of hydrogen energy in an all-round manner, achieve multi-scenario and integrated development of the hydrogen energy industry chain, and create a new chapter of green and low-carbon development. After the entire project is put into operation, it can reduce coal resource consumption by 254000 tons and carbon dioxide emissions by approximately 445000 tons per year.

Born and raised in Sri Lanka, Ningdong Base is the foundation and blessed land of Baofeng Energy. Since the establishment of the company for 15 years, the previous generation of Baofeng people have devoted all their efforts and time to Ningdong. At the end of the "13th Five Year Plan", Baofeng Energy plans a new chapter of development with a global perspective, opens up a broader Xintiandi in the "Golden Triangle" of energy and chemical industry, and strives to build Baofeng Energy into the world's outstanding modern coal to olefin supplier and service provider.

On July 1st this year, Baofeng Energy announced that it would establish a subsidiary in Inner Mongolia. The subsidiary is located in Wushen Banner, Ordos City, Inner Mongolia, and the construction content is 4 million tons/year coal to olefin and downstream extension project. After the completion of this project, Baofeng Energy's total polyolefin production capacity will exceed 6.2 million tons per year, ranking among the top in the world in terms of coal to olefin production capacity, which will play a major role in filling the polyolefin supply gap in China. At the same time, it will play a key role in further extending Baofeng Energy's coal chemical circular economy industrial chain, consolidating the company's scale advantage and leading position in the industry, and improving the company's overall profitability and sustainable development ability, It will also play a catalytic role in promoting the deep transformation, processing and utilization of coal resources in the Ordos region, expanding and strengthening coal to olefins, as well as downstream high-end new materials and fine chemical industry clusters.

In the year of the pandemic, with all industries struggling, why did Baofeng Energy dare to counter the trend and expand investment at this time? Party Yanbao, Chairman of Baofeng Energy, believes that danger inevitably breeds opportunity, and danger and opportunity have always been dialectical and unified. Currently, there is still a relatively large gap in the supply of polyolefins in China. In the future, with the promotion of new infrastructure construction, new urbanization construction, and strengthening the construction of major projects such as transportation and water conservancy, polyolefin consumption will continue to increase, with broad market space. Under this basic premise and logic, the more cyclical and depressed the market is, the more advantageous it is to introduce high-end technology from the industry, and the lower investment and construction costs compared to normal times. Based on a precise judgment of the industry situation, coupled with the current low debt ratio of the enterprise, the low cost of bank funds for new projects, and relying on a mature professional team, Baofeng Energy has the courage to make a countertrend layout.

The launch of the Inner Mongolia project means that Baofeng Energy has entered a new era of "Ningdong+Ordos" dual center development. On September 23rd of this year, as a major project launched by Ningxia to build a pilot area for ecological protection and high-quality development in the Yellow River Basin, Baofeng Energy's 500000 t/a coal to olefin project officially commenced construction, and the 500000 t/a carbon 3 to carbon 5 comprehensive utilization to olefin project was also launched. After the completion of the project, a new polyolefin production capacity of 1 million tons will be added every year, increasing the annual polyolefin production capacity of Baofeng Energy's Ningdong Base by 2.2 million tons, and the annual methanol production capacity by 6.4 million tons. The advantages of integration and scale will be more prominent, the profitability will be further enhanced, and the advantages of leading high-end coal based new materials enterprises will be more obvious.

Based in Ningdong and facing the world, Baofeng Energy has built an outstanding modern coal chemical industry leader. In the closing year of the "13th Five Year Plan", the blueprint has been drawn and the future can be expected.

"Black Horse", the leader of the capital market

Taking the lead in the "Golden Triangle" and advancing into the capital market, becoming a public enterprise through listing, and realizing the second take-off of the enterprise through the power of finance and capital, is another memorable monument of Baofeng Energy during the "13th Five Year Plan" period.

On April 18, 2019, Baofeng Energy's A-share listing was approved by the China Securities Regulatory Commission; On May 16, Baofeng Energy successfully went public on the Shanghai Stock Exchange, landing on the Chinese A-share capital market. This time, the listed company raised a total of 8.155 billion yuan, mainly investing in the aforementioned phase II coke gasification to 600000 tons/year olefin project. Baofeng Energy has introduced a new trend of the times to the coal chemical industry with its outstanding performance of low cost and high profit, as well as a more modern operating style. In this sense, Baofeng Energy can be called the "black horse" killed by China's coal chemical industry.

In 2019, the gross profit margin of Baofeng Energy's coke products reached 45.33%, with a higher profitability than that of major domestic coke companies; The gross profit margin of coal to olefin enterprises is generally below 15%, with Baofeng Energy reaching 44.09%. Overall, in 2019, Baofeng Energy had an operating profit margin of 34.14%, a return on total assets of 15.67%, a weighted average return on net assets of 19.3%, and a cost expense profit margin of 48.58%. Not only did Baofeng Energy stand out among all listed coal chemical companies, but it was also considered beautiful among all over 4000 listed companies in China.

So, what is the unique gene of Baofeng Energy as the leader of modern coal chemical industry? The answer can be found from multiple dimensions, but the key is that Baofeng has opened up a new track that others cannot match. Baofeng Energy's Ningdong Base has a total planned investment of over 70 billion yuan, which is planned, centrally arranged, and implemented step by step. A complete industrial chain of "from a lump of coal to a bag of plastic raw materials" has been built in the same park. Each production unit has a compact layout, and public and auxiliary facilities are common, greatly saving construction costs. Compared with other enterprises of the same size with non-integrated layout, the investment is saved by more than 30%.

The comprehensive advantages of large-scale industrial chain, integrated construction, and high self-sufficiency rate of raw materials have brought significant cost and competitive advantages to Baofeng Energy. At the same time, looking forward to the fourth wave of industrial revolution, Baofeng Energy has also taken the lead in the field of informatization, automation, digitization, and intelligence. It plans to systematically introduce advanced technologies such as 5G, and create a new "smart factory" of artificial intelligence and industrial interconnection, realizing a disruptive transformation of traditional coal chemical industry.

Take on responsibilities bravely and help overcome difficulties

This year is the closing year of the "13th Five Year Plan", and it is also a crucial year for China to achieve the goals of the previous century and build a moderately prosperous society in all respects. Targeted poverty alleviation and fundamental poverty alleviation are China's economy during the "13th Five Year Plan" period