Financial News Agency, December 12 (Reporter Zhao Zixiang) As a leading coal chemical company, Baofeng Energy (600989.SH) has continued to release coal-to-olefin production capacity in recent years, and the cost difference compared to peers and other routes has always been the focus of the industry's attention. On December 12, the company stated at the performance briefing that the company's recent gross profit per ton of coal-to-olefin is about 2,600 yuan/ton, and the cost advantage is obvious.

Furthermore, with regard to the EVA device that was previously revealed to be connected to the main equipment by the end of December, Baofeng Energy further stated at the performance briefing that the Ningdong EVA device is expected to be put into trial production before the end of the year. However, due to the current high prices of mixed carbon 4, mixed carbon 5 and above, Baofeng Energy said that considering the company's overall efficiency, OCC and SCU units have not been put into operation in the Ningdong Phase III olefin plant project. Currently, the alcoholene ratio is slightly higher than the design value.

According to public information, Baofeng Energy's main business is the three major sectors of coal-to-olefin, coal-to-coking, and fine chemicals. In 2022, the three business segments accounted for 41.1%, 46.1%, and 12.2% of revenue, respectively. The company's current olefin sector products include polypropylene/polyethylene/EVA, etc., coking sector products include coke and its by-products, while the fine chemical sector includes crude benzene hydrogenation products, deep processing products for tar, and four-carbon deep processing products.

According to information, since the commercialization of coal-to-olefin in 2011, domestic coal-to-olefin costs have a clear advantage over market-leading naphtha routes. According to brokerage estimates, in 2011-2022, the average production cost per ton of domestic coal-making routes, naphtha routes, and ethane cracking routes was 4490/7384/4,650 yuan/ton, respectively. The low cost advantage of the coal-making route is remarkable.

At the performance meeting, some investors asked questions about the profitability of olefin products and how the company adjusted the production and sales volume of olefins. Baofeng Energy responded that the current average price of the company's polyolefins (including polypropylene and polyethylene) is 7,380 yuan/ton including tax, and the average price of methanol raw coal to the factory including tax is 700 yuan/ton (5,000 kcal). The company's recent gross profit per ton of coal-to-olefin is about 2,600 yuan/ton. Compared with oil heads and gas, it has a clear cost advantage.

A financial news agency reporter learned from the industry that Baofeng Energy's gross margin has always been significantly ahead of comparable companies, mainly because Baofeng's olefin production costs are at a low level throughout the industry.

According to Baofeng Energy's previous disclosure, the company's industrial chain is closely connected, and the products of the previous unit directly become raw materials for the next unit, greatly reducing comprehensive costs such as energy consumption and logistics costs, and is about 30% lower than that of enterprises of the same size in the same industry.

Recently, the production capacity of Baofeng Energy's olefin sector has also continued to be built. Currently, the production capacity is 600,000 tons/year for phase I olefins and 600,000 tons/year for phase II olefins in Ningdong, for a total of 1.2 million tons/year. The third phase design has a production capacity of 1.15 million tons/year, including 400,000 tons of polyethylene, 500,000 tons of polypropylene, and 250,000 tons of EVA.

Among them, the EVA project has not yet been put into operation. The company said in an agency survey last month that it expects to complete the construction and installation of major equipment by the end of November, connect the main equipment by the end of December, and launch the product in January 2024. At the performance meeting, the schedule was further updated. The company stated that the EVA device will be put into trial production before the end of the year, that is, there are still more than two weeks left.

It is worth mentioning that the Ningdong Phase III project is the first set of devices to achieve mass production with the third-generation DMTO technology in China. However, according to the company's previous disclosure, there is still some gap between the diene yield and design indicators since the device was put into trial operation.

In response, some investors asked questions about the latest diene yield and whether the design requirements have been met. Baofeng Energy said that the current diene yield of the Ningdong Phase III olefin plant is about 35%. The main reason for this is that the prices of propane, C4, and C5 are currently high. Considering the company's overall efficiency, first, the MTO unit's coke control system has stopped operation, increasing C4 and C5 yield; second, the OCC and SCU units that use ethane, propane, C4, and C5 as raw materials to produce ethylene and propylene have not been put into operation.

Regarding the specific parameter performance, Baofeng Energy further explained, “Currently, the coal-to-alcohol ratio is 1.46 tons/ton (the calorific value of incoming coal is 5140 kcal), and the alcohol-ene ratio is 3 tons/ton. Due to the current high prices of mixed carbon 4, mixed carbon 5 and above, considering the company's overall efficiency, OCC and SCU devices have not been put into operation, and the alcoholene ratio is slightly higher than the design value.”

However, Baofeng Energy also said, “Although the yield of diene is low, the yield of ethane, propane, C4, and C5 is high, which is beneficial to the company's overall efficiency.”