China Resources Cement Ji Youhong: Transformation and Upgrading Are Just in Time, the Development of Cement Industry in 2020 can Be Expected

2020 is the last year for completing the building of a moderately prosperous society in all respects and the implementation of the 13th Five-Year Plan, as well as the last year of the "three major battles". Maintaining the smooth operation of the economy is of vital importance, and whether the above goals can be achieved has become the common expectation of 1.4 billion Chinese people. The

sudden outbreak of the epidemic has affected all walks of life. Mr. Ji Youhong, President of China Resources Cement Holdings Limited (HK1313, hereinafter referred to as "China Resources Cement"), pointed out when communicating with China Cement Network that the impact of the epidemic on the cement industry will also be alleviated with the orderly resumption of production in various regions of the country.

to benefit from the tide of resumption of work in the year of https://img7.ccement.com/richtext/img/b5ea6mudoy61587345908953.2020

" The impact of the epidemic on the South China market is limited

. The outbreak of the epidemic has brought most of the national infrastructure investment projects to a standstill, affecting all walks of life to varying degrees, and the cement industry is no exception.

According to the data of the National Bureau of Statistics, from January to February, China produced a total of 10000 tons of cement 14982, down 29 from the same period last year. It is estimated that the cement output in the first quarter will be 2.5-2.

"Under the impact of the epidemic, the national cement industry has been greatly affected in the first quarter." Ji Youhong pointed out in the exchange that the decline in cement production in South China from January to February was comparable to the national level. In terms of price, the fluctuation in South China from January to February

In order to alleviate the impact of the epidemic on the economy, after the initial control of the epidemic in China, all regions of the country are also promoting the resumption of work and production in an orderly manner. Due to the improvement of the epidemic situation, the provinces in South China have become one of the first regions to start the tide of resumption of work.

" According to Ji, At the beginning of April, the sales level of the subsidiaries of China Resources Cement has reached about 90%. By the middle of April, except for a few areas, China Resources Cement has basically recovered to the same sales level before, reaching the state of balanced production and marketing. In addition, according to the resumption of downstream customers monitored by China Resources Cement, the resumption rate of key projects in Guangdong and Guangxi is also above 90%.

"Generally speaking, due to the early resumption of production in South China and the high level of resumption of production, the impact of the epidemic on the cement industry is limited.". "Ji Youhong said.".

In

the

face of the sudden "visit" of the new coronavirus, the Chinese government has taken a series of timely and effective measures to bring the domestic epidemic under initial control, but the worldwide outbreak of the epidemic. It adds a lot of uncertainty to the global economy.

Under the background of coordinating the work of "six stability", the state and local governments have made great efforts to promote the effectiveness of various policies and measures to stabilize investment. The National Development and Reform Commission (NDRC) pointed out that it will accelerate the construction of major projects and infrastructure that have been clearly defined in the national plan, expand the scale of local government special bonds, speed up the preparation of special bond projects, and support the construction of infrastructure and public service projects with certain returns. In terms of monetary policy, since April 7, the central bank has decided to reduce the interest rate of excess deposit reserve from 0.72% to 0.

A series of infrastructure investment policies issued by the state and local governments to stabilize growth and protect people's livelihood have also brought strong support to cement demand.

Ji Youhong believes that although the cement industry was greatly affected in the first quarter, after the epidemic, with the pull of infrastructure projects, the demand for cement will grow explosively and reach the level of 2019 throughout the year. "Compared with 2019, even if there is no growth this year, it can at least be guaranteed to be flat." Ji Youhong explained that on the one hand, demand-driven can make up for the adverse effects of the epidemic in the first quarter, on the other hand, the production capacity of the cement industry itself can meet the explosive growth of demand.

cement supply and demand, and with the advancement of key projects, it will also have a positive impact on the demand for cement in the next year. In terms of

price, Ji Youhong believes that cement prices in South China are not only affected by supply and demand, but also by weather . In particular, the amount of rainfall in the three months from June to August has affected the rise and fall of cement prices to a certain extent. Although it is impossible to accurately predict weather factors at present, on the whole, the average price of cement in South China will remain stable this year.

03

a new round of infrastructure stimulus supports the demand

of Guangdong and Guangxi markets in two or three years, according to the list of China's top 100 cement clinker production capacity released by China Cement Network in 2019. Newly increased clinker production capacity in Guangxi in 2019 263.

For the market of Guangdong and Guangxi, Ji Youhong also expressed his views to China Cement Network that Guangdong and Guangxi are a unified market. According to Ji Youhong's introduction, there are three views in the industry on the inflow of Guangxi cement clinker into Guangdong market. Zhengfang said that this shows that Guangdong's demand is strong, showing a shortage of supply and demand, and is generally an imported market. From a neutral point of view , since the reform and opening up, there has been a phenomenon that Guangxi cement is imported through the Xijiang River to meet the construction needs of the Pearl River Delta region, which is a normal thing. The opposite side believes that with the completion of the 100 million tons of gold waterway of the Xijiang River, Guangxi Cement is https://price.ccement.com/pricenewslist-1-440000-0.

to in Guangdong Province has been relatively strong , and the price of cement in the province has gradually increased since 2016. Although there are fluctuations, it is basically in a stable state at a high level, and the relatively stable price of cement also shows that the impact of external cement is limited. In addition, western Guangdong has a large population base and strong demand, but there are few local cement enterprises. The inflow of cement from Guangxi can also effectively supplement the gap in the Guangdong market. At present, the amount of cement clinker flowing into Guangdong from Guangxi is between 20 million and 30 million tons per year.

At the same time, if Guangxi wants to continue to increase production capacity, it is limited by capacity replacement indicators, pollutant emission indicators, land and mine indicators , all of which are indispensable, otherwise the new capacity is only a good wish.

To sum up, Ji Youhong believes that the Guangdong and Guangxi markets will remain relatively stable in two or three years, and the Datengxia Water Conservancy Project will not have a greater impact, thanks to the government's new round of infrastructure investment.

Ji Youhong visited China Cement Network (data map)

and took many measures to transform and upgrade Huarun Cement.

A few days ago, Huarun Cement released its performance announcement for 2019. In 2019, Huarun Cement achieved a total operating income of HK $38.956 billion, an increase of 0.42% over the same period last year. Net profit attributable to shareholders of the listed company was HK $8.618 billion, representing a year-on-year increase. 8

. Relevant reports pointed out that due to the decline in cement clinker prices, despite a slight increase in sales volume, the operating revenue of cement clinker of China Resources Cement decreased slightly in 2019, but with the support of a significant increase in concrete prices, the total revenue increased slightly throughout the year. Next, in addition to concrete, China Resources Cement will focus on sand and gravel aggregates, prefabricated buildings and other industrial chain extension areas.

01

Reasonable extension of the industrial chain

In recent years, under the background of overcapacity and demand entering a plateau period, more and more cement enterprises continue to extend the industrial chain, develop upstream and downstream aggregates and commercial mixed products, in order to promote the structural adjustment of enterprises and improve their competitiveness.

However, it is somewhat surprising that in recent years, when some cement enterprises are laying out the concrete industry chain, Huarun Cement, one of the main businesses of commercial concrete production and sales services, appears to be somewhat cautious in concrete.

Ji Youhong explained that at present, the concrete industry of Huarun Cement has been maintained at 61 concrete mixing stations with a total annual capacity of 36.9 million cubic meters, and there is no plan to expand substantially. The main reasons are:

First, China Resources Cement has always insisted on the compliance of concrete industrial land, with the increasingly stringent concrete land indicators, it also brings a lot of pressure on production costs.

Second, the problem of accounts receivable in the concrete industry is serious , in the absence of substantive measures to improve the problem of accounts receivable, the cash flow of enterprises will be greatly affected. Considering

comprehensively, in order to promote the long-term sustainable development of enterprises, China Resources Cement has maintained a steady and orderly pace in the extension of the concrete industry chain.

Day, Fifteen ministries and commissions jointly issued the Guiding Opinions on Promoting the Healthy and Orderly Development of the Sand and Gravel Industry, and some insiders pointed out that it is time for cement enterprises to develop the mechanism sand industry.

On the one hand, cement enterprises have abundant mineral resources , which are the unique resource conditions for cement enterprises to develop sand and gravel aggregate production, and the existing mining, crushing, screening, material transportation and storage technology of cement enterprises can also be used for sand and gravel aggregate production. On the other hand, the cement industry and the aggregate industry have highly complementary and integrated advantages in the operation and management of customers, markets, mineral resources, process equipment, management methods and human resources .

In this regard, Ji Youhong believes that the introduction of the guidance is a good thing for cement enterprises to enter the sand and gravel aggregate industry, and will also have a positive impact on the scale and greening of mine development in the sand and gravel aggregate industry. However, it should be noted that when some cement enterprises develop the sand and gravel aggregate industry, they use high-grade minerals to produce sand and gravel aggregate, resulting in a great waste of resources. Cement enterprises should extend the industrial chain more scientifically and reasonably. As early as a few years ago,

China Resources Cement has actively laid out the sand and gravel aggregate industry chain. In November

2019 and March 2020, China Resources Cement obtained the mining rights of aggregate mines in Wuping County, Longyan City, Fujian Province and Shangsi County, Fangchenggang City, Guangxi Province respectively, with planned annual production capacity of 2 million tons and 5 million tons respectively, and is expected to be put into operation in 2021.

"In the next three years, China Resources Cement plans to add more than 30 million tons of aggregate production capacity, with a total capacity of 50 million tons." Ji Youhong stressed.

Of course, in addition to the sand and gravel aggregate industry, China Resources Cement has also made major breakthroughs in assembly building, artificial stone and other aspects.

In 2019, China Resources Cement completed the acquisition of 40% of Global Stone through Runfeng New Materials. At the same time, we will actively build our own research and development capabilities, develop and promote new products such as inorganic artificial stone, carry out trial production of permeable concrete and large aggregate artificial stone, realize product development, promote strategic transformation of enterprises, create business synergy value and realize industrial chain extension.

02

Scientific development of co-disposal

During the epidemic prevention and control period, cement kiln co-disposal has become one of the important alternatives for emergency disposal of medical waste in epidemic areas because of its high efficiency, no secondary pollution and high safety.

Of course, co-disposal not only has great advantages in the treatment of medical waste, but also in the absorption of domestic waste, municipal sludge, hazardous waste and other aspects.

Ji Youhong also pointed out in his communication with China Cement Network that co-disposal was concerned during the epidemic period, largely because its safety was verified. Cement kiln co-processing has long been one of the most thorough and cleanest waste disposal methods. China Resources Cement has also been actively exploring the co-disposal of cement kilns, actively fulfilling the social responsibility of central enterprises, and striving to inject "green development" into its own genes.

"By the end of 2019, China Resources Cement has eight co-disposal projects with an annual processing capacity of 1.25 million tons." Ji Youhong added.

2: The NIMby effect is prominent ." In the process of promoting the landing of the collaborative disposal project, the residents around the enterprise may have objections to it, resulting in conflicting feelings, which will lead to many impacts.

As a traditional manufacturing industry, it is imperative to

vigorously promote the intelligent transformation and upgrading of the cement industry. But this transformation is not an overnight thing, from production to inventory to marketing, and even management, from traditional to intelligent upgrade is a very complex and huge project.

"What is intelligent manufacturing and what level to reach in the future require the cement industry to constantly explore and move forward." Ji Youhong said that although China's cement industry has been in the leading position in terms of technical equipment and automation level, it is still actively exploring in the process of promoting the continuous development of intelligent manufacturing.

Taking Huarun Cement as an example, as early as 2009, Huarun Cement took the lead in exploring the information construction and digital transformation of the cement industry, inserting the wings of the Internet for it. Over the past ten years, focusing on intelligent manufacturing + intelligent inventory, large sharing center and other fields, China Resources Cement has built 25 information systems, such as ERP, human resources management system, financial accounting system and one-card system, to gradually realize the mode of business transformation driven by information technology.

Among them, the cement production base in Tianyang, in cooperation with the SIEMENS (China), has carried out a pilot project of intelligent manufacturing. It includes production and operation management, equipment life cycle management, equipment prediction and analysis, advanced control and other important functional modules of the system.

Looking forward to the future, China Resources Cement will actively implement the five development concepts of innovation, coordination, green, open and sharing while carrying out in-depth intelligent manufacturing work, so as to promote enterprises to achieve new leaps and bounds. The rapid development of

China's economy can not be separated from the continuous progress of cement and other industries, and the rapid development of the cement industry is a microcosm of the times.