Cross-border aluminum and magnesium industry of Baowu Group for lightweight

The domestic non-ferrous metals industry, which has been relatively calm in recent years, has suddenly become lively due to the involvement of China Baowu Iron and Steel Group Co., Ltd. (hereinafter referred to as "Baowu Group"). Usually two separate industries began to have more overlap, Baowu Group from ferrous metals cross-border to non-ferrous metals, especially in the aluminum and magnesium industry's massive expansion has attracted attention both inside and outside the industry. What kind of chess is Baowu Group playing? Whether we can see the clue.

The war throws into the sea of clouds and metals.

Following the transfer of 51.7138 million shares of Mei Xiaoming, the controlling shareholder and real controller of Nanjing Yunhai Special Metals Co., Ltd. (hereinafter referred to as "Yunhai Metal") at a price of 7.02 yuan per share in December 2018, in August 2020, Baosteel Metals Co., Ltd. (hereinafter referred to as Baosteel Metal) under Baowu Group once again transferred 38.7854 million shares of Mei Xiaoming, the controlling shareholder and real controller of Yunhai Metal. And the premium rate of the transferred shares reached 53.85% over the previous period, and the price per share reached 10.80 yuan. At present, Baosteel Metals holds 14% of the total share capital of Yunhai Metals, with a total of 782 million yuan of real gold and silver. As Mei Xiaoming holds 18.03% of the total share capital of the listed company after the transfer of shares, he is still the controlling shareholder and actual controller of the company.

However, only three months after the second share transfer, Baosteel announced a major investment decision to join Yunhai Metals and Qingyang Construction Investment to set up a joint venture company in Qingyang County, Chizhou City, Anhui Province, spending 11.2 billion yuan to build an annual production capacity of 300000 tons of high-performance magnesium-based light alloy and deep processing project. In the joint venture company, Baosteel Metal contributed 1.08 billion yuan, accounting for 45% of the company's equity; Yunhai Metal contributed 1.08 billion yuan, accounting for 45% of the company's equity; and Qingyang Construction Investment contributed 240 million yuan, accounting for 10% of the company's equity.

Whether it is the two shares before and after the transfer, or the later joint investment with Yunhai Metal, it is clear that Baowu Group does not seek a controlling stake in the company and investment projects, so its intention may be more to play the role of a strategic investor.

Why is Baowu Group so in love with Yunhai Metal and willing to be the "second"? The research report of Great Wall Securities and the announcement of Yunhai Metal may help us solve our doubts. The reason why the two sides can work together is closely related to the industry and the status of Yunhai Metal itself.

Yunhai Metal as the leader of magnesium alloy in China, the production capacity of original magnesium and magnesium alloy and metal strontium is the first in the world, the industry is in the golden track, the enterprise is a high-quality target. At present, the company has a production capacity of 100000 tons of magnesium, 180000 tons of magnesium alloy, 285000 tons of aluminum alloy, 18000 tons of die castings, 10, 000 tons of microchannel flat tube, 15000 tons of master alloy and 3000 tons of strontium. The company has a complete industry chain from "dolomite ore-raw magnesium smelting-magnesium alloy casting processing-recovery and recycling", and independently developed "vertical tank heat storage technology" and "crude magnesium one-step method" to produce raw magnesium with high efficiency and low consumption, and the cost per ton is 20% lower than that of the industry. and supporting leftover material recovery to achieve 100% self-sufficiency in magnesium alloy raw materials, cost advantages and environmental protection results are remarkable, casting a solid moat. The reason why Yunhai Metal is deeply bound to Baosteel Metal is that it takes a fancy to the strong industrial background of Baosteel Metal and Baowu Group, and can make full use of its extensive and close customer resources in transportation and other fields. to help its own precise cut-in and rapid development in the demand side of magnesium alloy downstream, it can be described as "easy to enjoy the cool under the big tree".

Join the owner of Tongren Aluminum Co., Ltd.

Established in 2011, Henan Tongren Aluminum Co., Ltd. is a subsidiary of Henan Energy and Chemical Industry Group. Its aluminum alloy casting and deep processing project with an annual output of 600000 tons was identified as the first batch of key construction projects by the Henan provincial government in 2012, and it is also a major supporting project for Sanmenxia City to continuously promote industrial upgrading and accelerate the transformation of the mode of development. The project is positioned as "leading in China and first-class in the world", striving to build the most complete "bauxite-alumina-aluminum casting-aluminum deep processing" industry chain, comprehensively promoting the process of "coal-electricity-aluminum integration" in the regional economy, and giving full play to its cost advantages. use high-end projects to promote the scientific and technological progress of the aluminum industry in Henan Province and even in China.

Such a high-profile project is highly expected by governments at all levels and people from all walks of life. However, since the project was started in 2013, due to financial constraints and slow progress, the introduction of strategic investors has become an important agenda. Under the coordination and promotion of various parties, in February 2019, after nearly two years of negotiations, Baowu Group signed a joint venture and cooperation agreement with Henan Energy and Chemical Group and Sanmenxia Municipal Government in Zhengzhou, Henan Province. Baowu Group owns 51% of the shares in the same aluminum project, and entrusts the project to Baosteel stock management, which opens a new journey for Baowu Aluminum Industry.

After taking over the project, Baowu Group positioned its investment in the urgently needed high-end manufacturing of aluminum strip in key areas in China, which is widely used in automotive, aerospace, military, rail transit, packaging and other fields, and is in a leading position in the domestic aluminum processing industry. some products fill the gap in the domestic market. The total investment of the project will reach 12.8 billion yuan, covering a total area of 1561 mu, which is divided into two phases of construction. The first phase of the project has an annual output of 300000 tons of aluminum alloy intensive processing production line, with an investment of nearly 7 billion yuan, covering an area of 790mu. It mainly includes melting and casting workshop, medium and heavy plate workshop, cold rolling workshop, finishing workshop and auxiliary facilities. The design capacity is 80, 000 tons / year for aluminum alloy automobile plate, 50, 000 tons / ton for aluminum alloy medium and thick plate, and 170000 tons / year for aluminum alloy plate and strip.

With the arrival of the Baosteel management team, the aluminum project construction pressed the acceleration key, and all the work was quickly carried out in an all-round way. From project construction to equipment selection to customer contact, everything is in a tight and orderly manner. On December 20, 2020, Baowu Group successfully held the commissioning ceremony of the first phase of the project. It takes less than 2 years for the project to be put into production, which can be called the "Extreme Speed" for investment and construction in the aluminum processing industry. According to Chen Derong, party committee secretary and chairman of Baowu Group, the investment construction of the second phase of the project will be carried out immediately after the first phase of Baowu Aluminum Industry is put into production, and the total investment of the second phase of the project will reach 5 billion yuan.

Come in order to lighten the weight

Baowu Group so large-scale or strategic shareholding or holding operation, involved in the aluminum and magnesium industry, seemingly simple corporate investment behavior is actually very meaningful, its strategic planning admired the industry. Baowu Group cross-border aluminum and magnesium is mainly for the lightweight of our country, especially in the field of transportation.

Lightweight in the field of transportation in China is an effective way to achieve energy saving and emission reduction, lightweight has become the development trend and focus direction, a variety of lightweight structures, components and materials are being used more and more widely. In the choice of lightweight materials, aluminum and magnesium has a bright future. Aluminum and magnesium are both light metals, and their alloys are ideal lightweight metal structural materials because of their excellent properties such as low density and high strength, and have a broad application prospect in the field of transportation. however, due to many reasons such as the level of economic development and technology in our country, great progress has been made in the field of transportation. However, compared with foreign countries, there is an obvious gap in product R & D, manufacturing and application popularization. As far as automobile aluminum sheet is concerned, whether it is a domestic car of its own brand or a wholly foreign-owned car enterprise, the aluminum plate used is still imported or produced by foreign capital. the aluminum sheet produced entirely by our country has not reached the standard and passed the standard in terms of quality stability and service ability.

It is precisely because of the national policy, industry development trend and current situation that large iron and steel enterprises such as Baowu Group not only see the huge business opportunities in lightweight, but also realize the responsibility on their shoulders. In addition, Baowu Group itself has a say in the downstream transportation manufacturing industry, aluminum-magnesium alloy materials and parts with goods have incomparable market advantages over other enterprises, and its development of light metal materials has more inherent foundation and unique conditions. It is precisely for this reason that Baowu Group has established the "one base and five yuan" development strategy, that is, based on the iron and steel manufacturing industry, in the coordinated development of new materials industry, intelligent service industry, resources and environment industry, industrial park industry, and industrial finance, the new materials industry focuses on the development of advanced manufacturing industries and the needs of large countries, focusing on promoting magnesium, aluminum and other light alloy materials needed in new energy, marine engineering, aerospace and other fields. It is not difficult to understand why Baowu Group has been involved in the aluminum and magnesium industry in recent years. For example, the aluminum plate project invested by Baowu Group is to fill the gap in the domestic market and provide high-quality aluminum for China's automobile industry to achieve weight loss and energy saving.

In 2020, at the 75th session of the United Nations General Assembly, our government clearly proposed to take more effective policies and measures to strive for carbon dioxide emissions to reach a peak by 2030 and strive to achieve the commitment of carbon neutrality by 2060. One of the main measures is to promote energy saving and consumption reduction in the field of transportation. The lightweight in the field of transportation is a powerful "push hand" and "grip". The new national policy and carbon reduction target are bound to speed up the lightweight process in the field of transportation in our country.

Baowu Group is now entering the aluminum and magnesium industry at the right time. At present, we are also pleased to see that the aluminum and magnesium industry is beginning to integrate deeply with manufacturing enterprises in the field of transportation, upstream and downstream linkage, industry-university-research collaboration for lightweight help. We also firmly believe that with the in-depth expansion of Baowu Group in the aluminum and magnesium industry, it will promote the wider application of aluminum and magnesium materials in the field of transportation, and increase the speed of lightweight vehicles such as automobiles, ships, airplanes and other vehicles in our country. this is exactly the expectation of the aluminum and magnesium industry.