JCPCC: A Leading Phosphor Products Manufacturer

1. Own abundant phosphate resources   

Jiangsu Chengxing Phosph-Chemicals Company Ltd. (JCPCC, SH:
600078) is located in Jiangyin, Jiangsu province. JCPCC mainly
produces more than 40 varieties of phosphorus chemicals such as
yellow phosphorus (including P2O5), phosphoric acid, calcium
hydrophosphate and sodium tripolyphosphate. The company owns
abundant phosphate reserves. Phosphate rocks in China are mainly
distributed in Yunnan, Guizhou, Sichuan and Hubei provinces.
Reserves in these 4 provinces account for 66% of the national
total. JCPCC holds around 15% of phosphate resources in Yunnan
province, reaching 80 million tons. The company has already got
the certificate for mining these reserves. There are also
considerable phosphate reserves with the right to explore. In
all publicly listed phosphorus chemical companies in China,
JCPCC is a company with the most abundant phosphate reserves.
   According to the estimation made by China Chemical Mine
Association, the output of phosphate fertilizers in China will
reach 12 million tons (100%) in 2010. Apart from the consumption
in other phosphorus products, phosphate resources for the
phosphate fertilizer production alone will have a supply deficit
of over 8.0 million tons. In the downstream demand, 82% of
phosphate rocks are used in the phosphate fertilizer production.
To guarantee China from grain deficit, the government has
formulated tactics for an orderly development of phosphate
resources. The development of phosphate resources is therefore
restricted. Besides, the phosphate fertilizer industry and the
phosphorus chemical industry are developing rapidly. The demand
growth of phosphate resources is higher than the supply growth.
The price of phosphate rocks has remarkably increased. It is
released that the price of phosphate rocks with a P2O5 content
of 30% was RMB55 per ton in 2000 but has increased to more than
RMB300 per ton today.
   As phosphate resources in China have become non-metal
resources with great supply deficit, the reformation of the
phosphorus chemical industry will accelerate. The price of
phosphorus products will therefore have a rising trend. Abundant
phosphate resources owned by JCPCC will help the company realize
the long-term development.
   
2. Reduce production cost

The thermal power station and the hydraulic power station
constructed by JCPCC will put on stream in 2006. The power cost
in the company will therefore remarkably reduce. The 3
generating sets in the hydraulic power station constructed in
Mile Yellow Phosphorus Production Base put on stream in August
2006. The company has also purchased coal mines with coal
reserves of around 56 million tons. The 3 generating sets in the
thermal power station constructed in Xuanwei Yellow Phosphorus
Production Base conducted ignition at the end of July 2006. As
coal becomes self-supplied, the power cost can be reduced to
RMB0.21 per kWh. The price of grid power being used in the company
today is RMB0.37 per kWh on average. After the completion of the
thermal power station and the hydraulic power station in 2006,
power that is needed in yellow phosphorus units of the company
in Yunnan province will become totally self-supplied. Yellow
phosphorus is a product with great power consumption. The power
consumption per ton of product is around 14 thousand kWh. The
reduction of the power cost will greatly enhance the competitive
edge of the company.
   The output of yellow phosphorus in the company was 20 000 tons
in 2005. Eighty percent of yellow phosphorus needed in the
production has to be purchased from outside sources. After the
completion of the two mine/power/phosphorus projects in Xuanwei
and Mile Yellow Phosphorus Production Bases, the capacity of
yellow phosphorus in the company will reach 120 000 tons and the
company will become one of the leading yellow phosphorus
producers in China. Owing to the self-supply of yellow
phosphorus, the production cost is expected to reduce by around
RMB180 million.
   Besides, the company's products have the industrial chain of
multinationals and the cost reduction will turn into profit.
Multinationals such as Unilever, P&G, Coca Cola and Pepsi Cola
are downstream users of sodium tripolyphosphate, calcium
hydrophosphate and food-grade phosphoric acid produced by the
company. Purchase confirmations are all long-term contracts
with a fixed end price. As the company's products extend to
upstream raw materials, the cost reduction will also turn into
profit. The company is also a major exporter of phosphoric acid
and sodium tripolyphosphate.

3. Develop cyclic economy and coal chemistry

Great quantities of tail gas containing rich carbon monoxide are
emitted in the yellow phosphorus production. The company plans
to use the tail gas to develop cyclic economy. Projects that have
already been planned include fuel gas power generation and C1
chemistry. Changzhou Xinya Chemical Co., Ltd. already purchased
by JCPCC is one of the major DMF (dimethyl formamde) producers
in China. Its products are ammonia, methanol and DMF. The company
also has talents for the development of cyclic economy and C1
chemistry. These two sectors will become new growth points of
the company.