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Yongdong Co., Ltd. plans to launch a project for the fine processing of coal tar and the comprehensive utilization of special carbon black. Author/Source: Coal Chemicals Reader; Date: April 30, 2020; Clicks: 15. On April 28, Shanxi Yongdong Chemical Co., Ltd. (referred to as “Yongdong Co., Ltd.”) announced that it intends to raise funds through the public issuance of convertible corporate bonds, with these funds to be used primarily for the fine processing of coal tar and the comprehensive utilization of special carbon black. The total investment in this project is 293,893,800 yuan. The preliminary planned construction period for this project is 24 months. Once completed and brought into operation, it will enable an annual production capacity of 15,000 tons of refined crude phenols such as catalytic phenol and m-p-cresol, 20,000 tons of impregnation asphalt, and 70,000 tons of special types of carbon black including high-performance low-rolling-resistance carbon black, carbon black for high-end products, conductive carbon black, and carbon black with high pigment content. The announcement states that the project for the fine processing of coal tar and the comprehensive utilization of special carbon blacks includes production facilities such as devices for refining crude phenol, devices for producing impregnated asphalt, devices for producing special carbon blacks, tanks for storing raw materials and finished products, as well as finished product warehouses, along with various supporting auxiliary facilities and utility systems. The successful implementation of the projects funded by this raise will fully leverage Yongdong Co., Ltd.’s advantages in its circular economy industry chain, enable the development of new types of high-end carbon black, and help the company advance its carbon black products toward higher quality levels. This will lead to more sophisticated, differentiated, and large-scale carbon black products. At the same time, it will further expand the industrial chain for the refined processing of coal tar, increasing the variety of high-value-added chemical products derived from coal tar. All of this is of great significance for the company’s expansion into the field of new materials as well as for the transformation and upgrading of its product structure. It is understood that Yongdong Shares is located in the New Coal Coking Industrial Park in Jishan County, Shanxi Province. The company focuses on the continuous expansion and efficient utilization of the value-added processing chain for coal tar, thereby establishing a sustainable circular economy business model that integrates \"carbon black production + coal tar processing + waste gas power generation + fine chemicals.\" By gradually increasing the production and sales volume of its core products, the company enhances its scale efficiency ； On the basis of strengthening its core business in carbon black, the company makes full use of the advantages of its circular economy industry chain, gradually expanding into areas with high technological content such as finely processed coal tar products and high-quality carbon black, striving to become a competitive high-end chemical products manufacturer with a complete industry chain. According to the announcement, the projects funded by this raise will also add a refining capacity of 15,000 tons per year for crude phenols such as coking phenol and m-p-cresol, as well as 20,000 tons per year for impregnating asphalt. In addition, fine chemical products such as refined phenols including phenol, o-cresol, and m-p-cresol, as well as impregnated asphalt, will be produced. If the projects funded by the raise are implemented successfully, on the one hand, the company’s value-added processing chain for coal tar will be further expanded; on the other hand, it will enable the company to optimize its industrial chain structure, develop high-value-added products, create new sources of profit growth, and enhance its overall profitability. Among them, the cresol refining and impregnated asphalt projects are particularly noteworthy, as they allow for the full utilization of the waste heat generated during the company’s existing carbon black production process. This not only helps save energy but also reduces the direct emission of carbon black exhaust gases, enabling the comprehensive utilization of such exhaust gases. At the same time, the raw materials for the impregnated asphalt and crude phenol refining projects are medium-temperature asphalt, a primary product obtained from the company’s existing coal tar processing operations, and crude phenol, a by-product; this allows for the full utilization of coal tar resources ； Furthermore, the pitch impregnation process also generates a by-product called carbon black oil, which can be used in the production of specialty carbon black products. It is evident that the implementation of these projects funded through this fundraising will help enhance Yongdong Shares’ advantages in its circular economy industry chain, further optimizing the comprehensive utilization of coal tar resources. According to calculations, once the projects funded by this investment are completed and brought online, they will generate for the company an average annual sales revenue of 699.6996 million yuan, an average annual profit of 60.1613 million yuan, an investment profit margin of 18.12%, and a financial internal rate of return of 19.21% (after taxes). The payback period for the investment, after taxes, is 6.77 years; thus, the economic benefits of these projects are exceptionally good. Once this project is completed and put into operation, the company will introduce new types of specialty carbon blacks, including high-performance carbon blacks with low rolling resistance, carbon blacks for high-end products, conductive carbon blacks, and carbon blacks with high pigment content. These carbon blacks can be used in the industries of green tires, industrial rubber products, plastics, inks, and coatings. According to predictions by China Rubber Network, the market size for specialty carbon blacks is expected to grow at a compound annual growth rate of 8.1% from 2020 to 2025. The development of the entire industrial chain for new carbon black materials holds great promise. It is worth noting that since its establishment, Yongdong Co., Ltd. has been actively engaged in research in the field of new materials for fine chemicals. Over the years, it has conducted in-depth studies on new products and materials such as high-end carbon black, refined crude phenol, and impregnated asphalt, accumulating extensive experience and obtaining relevant technical patents. At the same time, the company has already reached cooperation agreements with enterprises that possess experience in carrying out crude phenol refining project construction, the necessary technical capabilities, and the relevant qualifications. According to the American publication “Rubber World,” market research firm Stratview Research recently released a report stating that there is a significant demand gap in the mid-to-high-end carbon black market – products such as low-rolling-resistance carbon black required for green tires and carbon black used in high-end applications. The market for specialty carbon black is expected to grow at a compound annual growth rate of 8.1% from 2020 to 2025. Research and Markets’ report predicts that the market for green low-rolling-resistance tires will reach $104.23 billion by 2022. The investment projects funded by Yongdong Shares this time involve the production of high-performance, low-rolling-resistance carbon black, carbon black for high-end products, and high-pigment carbon black. It is expected that the annual output of high-quality carbon black will reach 70,000 tons, thereby enabling the company to develop its carbon black products in terms of higher quality, greater differentiation, and more variety. This will help the company strengthen its leading position in the carbon black industry and its relationships with existing customers, while also allowing it to acquire new customers and further increase its market share and profitability. By increasing production of high-end carbon black, the company can effectively meet the demands of downstream customers for high-quality carbon black, ensuring the proper utilization of the new production capacity and the smooth sale of the additional output. Furthermore, the impregnated asphalt that Yongdong Shares is introducing into more advanced industrial areas this time represents a logical extension of the needle coke business that the company launched through a private offering in 2019; it can be said that impregnated asphalt is related to needle coke in terms of its origin. The main use of impregnated asphalt is to fill the pores of ultra-high power graphite electrodes. In the field of steel production using ultra-high power electric furnaces, the rapid growth in demand for electric furnace steelmaking as a result of supply-side reforms has further driven up the demand for impregnated asphalt. The main product currently offered by the company, modified asphalt, is used as a binder for graphite electrodes. Its downstream customers are enterprises that manufacture graphite electrodes, and these customers overlap with those who purchase impregnated asphalt. By leveraging its advantages in product quality, the company has established longer-term and more stable cooperative relationships with these graphite electrode manufacturers, and these clients represent potential customers for the company’s new products. On April 29, Yongdong Co., Ltd. released its annual report for 2019; the company achieved total operating revenue of 2.86 billion yuan in that year, a 10.4% increase compared to the previous year ； The net profit attributable to the parent company was 91.036 million, a decrease of 67.2% year-on-year ； Earnings per share were 0.26 yuan. In the first quarter of 2020, the company achieved total operating revenue of 450 million, a decrease of 29.5% compared to the previous year ； The net profit attributable to the parent company was 17.778 million, a decrease of 19.6% on a year-on-year basis. In addition, Yongdong Shares also released its first-quarter report for 2020; the company achieved total operating revenue of 450 million yuan in the first quarter of 2020, a decrease of 29.5% compared to the previous year ； The net profit attributable to the parent company was 17.778 million, a decrease of 19.6% on a year-on-year basis; the decline was smaller compared to the same period last year ； Earnings per share are 0.05 yuan. During the reporting period, the company’s gross margin was 16.4%, up 2.1 percentage points on a year-on-year basis, while the net margin was 3.9%, remaining roughly at the same level as in the corresponding period of the previous year.