Shanghai Petrochemical: Construction of a 1,000-ton carbon fiber production line, plus new materials to support high-end manufacturing

On the morning of July 11, 2019, Sinopec Shanghai Petrochemical Co., Ltd. (hereinafter referred to as Shanghai Petrochemical) and the Panorama Network held a “Smart Factory, Green Chemical” investor research activity. Shanghai Petrochemical is one of the largest integrated petrochemical and chemical companies in China; it is an important producer of refined oil, intermediate petrochemicals, synthetic resins and synthetic fibers in China; it is also the first stock in China in Shanghai, Hong Kong and New York. A company listed on the three places. The survey attracted more than 40 people from investment institutions, brokerage analysts, individual investors in the sales department, and the media. Guo Xiaojun, executive director, deputy general manager and secretary of the board of directors of Shanghai Petrochemical Company, the securities affairs representative, the development and technology department and the head of the finance department held discussions on the development of the company and the future planning at the symposium.

The survey visited the Central Control Room of the Polyolefins Joint Unit of the Plastics Department and the Shanghai Petrochemical Exhibition Hall to learn about Shanghai Petrochemical’s production, operation, safety and environmental protection. Investors’ seminars and investors discussed the development opportunities of Shanghai Petrochemical. challenge. In the plastic control room of the plastics department, employees have monitored the parameters of the device site 24 hours a day to ensure the safe operation of the device. Subsequently, the investors came to the Shanghai Petrochemical Exhibition Hall. The pavilion concentrated on the major events and development history of Shanghai Petrochemical since its completion. It felt the atmosphere of building the land in the early stage of the construction of the plant, and the atmosphere of unity and prosperity, carrying forward the hard work, scientific and realistic, united and enterprising. Forget the “Golden Mountain Spirit” dedicated to me.

It has become the benchmark of the petrochemical base industry and is leading the world in the world. It is the development goal of Shanghai Petrochemical. Guo Xiaojun said that there are three main aspects to the planning of Shanghai Petrochemical in the next three to five years. First, to build a leading manufacturing and manufacturing of ethylene and downstream derivatives; second, to make the production of carbon fiber and high-value composite materials as the core development business of the company; third, to build a petrochemical base on the north shore of Hangzhou Bay. At present, Shanghai Petrochemical has made breakthroughs in the development of carbon fiber. In 2018, it achieved the only 48k large tow production technology in China. China has thus become the fourth country in the world to have this technology.

Regarding the next development focus of Shanghai Petrochemical, Guo Xiaojun talked about six aspects: First, deepen the integration of refining and chemicals, and further enhance the refining technology. Second, the basic chemical transformation, some need to reduce, and some need to be upgraded. For example, the carbon 4 carbon 5 business still has a very broad space for development. Third, safe green and low-carbon development, do a good job of the company’s own environmental governance, and focus on the development of renewable energy, such as wind and hydrogen. Fourth, optimize the industrial layout and form a situation of integration of production cities with the development of regional cities. Fifth, the use of It technology to develop traditional manufacturing to smart factories. Sixth, the development of high-end materials and fine chemicals, as the quality of life continues to improve, materials also need a revolutionary nature.

In the investor interaction and exchanges, investors and researchers present at the scene asked questions from senior executives such as “hydrogen energy”, “carbon fiber”, “cost control” and “investor return rate”. The following is a question and answer record:

Investor: Carbon fiber This Shanghai petrochemical may still be in a state of trial production. I would like to ask how long this state will be able to go to mass production. How long is it expected?

Guo Xiaojun: About 500 tons of carbon fiber is just a technically proven device. We have experienced three years of production and verification, and now it has matured. We are building a 1,000-ton production line and will eventually form a production capacity of 1,500 tons, which will be formed by the end of next year. After the capacity of 1,500 tons is formed, we will have 48k and 12k simultaneous commercial supply. We have seen new materials, especially carbon fiber hopes for high-end manufacturing support in Shanghai, so we are also planning the scale of some of the devices that will be developed later.

Investors: Shanghai Petrochemical has 280,000 tons of hydrogen output. The chemical plant is a large hydrogen-consuming industry. How much of the 280,000 tons of hydrogen energy is produced for personal use? How much is it for social use? Is the company’s hydrogen made from coal or natural gas, or is it made with an oil machine?

Guo Xiaojun: About hydrogen, it is currently produced for its own use. Shanghai Petrochemical uses natural gas to produce hydrogen, which also produces a part of the by-product hydrogen during processing, which is basically balanced. But as our diesel gasoline is reduced, some hydrogen can be vacated as a source of our hydrogen supply. As an energy provider, in addition to traditional energy supply, hydrogen energy should also participate in this business, and adjust our industrial structure with the development of hydrogen energy business. At present, there are still many technical bottlenecks in hydrogen fuel, but we are also concerned about making adequate preparations. We have this condition, and in the supply of hydrogen, it has become a strong support in these regions.

Investors: Most of Shanghai Petrochemical’s raw materials are imported from the international market. Then the price of international crude oil is relatively large for Shanghai Petrochemical. How to control costs?

Guo Xiaojun: Crude oil accounts for 80% of our cost, so it has always been the focus of research. For the fluctuation of crude oil prices, we mainly take reasonable stocks. We do not do futures hedges. Because there is a lot of commercial risk, we only process how much to buy, not to buy goods, not to gamble high prices and low prices. This is the most reasonable way for processing companies. In general, the price we purchase has an advantage in the competition of the peers, thanks to our production process and the equipment conditions of the production equipment. Under the same market conditions, the purchase price of our crude oil in the same industry can be about one dollar lower. The price difference between this price is mainly due to the price difference caused by high sulfur and heavy quality. Then we calculate the added value of the processing of the entire crude oil all the time, and use mathematical models to determine whether it can produce the most value-added products. We started early in this area and walked relatively stable, ensuring that we get the most economic benefits at the same purchase price. This is what we have achieved in crude oil research.

Investors: Shanghai Petrochemical’s Hong Kong and domestic valuations are quite different, because the current financing costs are relatively low, will there be any plans to convert dividends into repurchases in the future, and increase the rate of return to investors?

Guo Xiaojun: We have always attached great importance to returning shareholders, so we have been committed to paying more than 30% of our profits for the year. The proportion of dividends in our past few years is still relatively high. Of course, we also comprehensively consider the situation of the current year’s income and some of the needs of future development, and make a reasonable distribution. We return the cash we hold to our investors as much as possible.