Zhang Chaohui believes that Chizhou’s investment promotion work is realistic and pragmatic, the investment environment is good, and the mine resources meet the quality requirements of building aggregates. According to the agreement, the company will establish Chizhou Hongsheng Building Materials Co., Ltd. with a registered capital of more than 500 million yuan. It will invest about 4 billion yuan to build a large construction aggregate production mine in Shenshan, Pailou Town. The construction period of the project is two years, and the production scale is 100 million tons/year. After the project reaches its production capacity and efficiency, it is expected to achieve an annual output value of 750 million yuan to 1 billion yuan and solve the employment problem of 500 workers.

Three twists and turns: the world’s largest sand and gravel aggregate production base may settle down

After the formal signing of the contract between Richang Sheng and Chizhou government, the follow-up work encountered great obstacles, mainly reflected in three aspects: first, it involved the raising of billions of funds. Although Richang Sheng has established a special financing team and conducted cooperation and discussion with several investment institutions such as Ping An Bank, Zhejiang Branch, it has never reached consensus on some key links; Second, it involves the public transfer of more than 1 billion tons of mine resources, which means that the transfer will be completely market-oriented, open and transparent, and potential competitors pose a great threat to the smooth mining activities of Nichang Sheng. In particular, Conch Cement, which is located in Chizhou, is a strong competitor it has to face; Third, it involves the construction of a supporting wharf with an annual throughput of 100 million tons. Such a huge wharf construction needs the joint approval of national ministries and commissions. Whether it is in the overall value interests of the country to occupy the Golden Waterway to transport a large amount of sand and gravel aggregates, its comprehensive difficulty can be imagined.

2、 Latest progress: the project quietly changed hands, and Powerchina Group took over the offer strongly

Due to various reasons and practical difficulties, Nichang Sheng’s aggregate project in Chizhou was put on hold for a time, and there was no subsequent development after the second half of 2014. In 2015, Chizhou Aggregate Project appeared again in the public view, and at this time, the project had already changed its owner. The receiver was replaced by China Power Construction Group, and the central enterprises were strongly involved in the Chizhou Aggregate Project, which seemed to indicate that the story had entered a more exciting next episode after the boring advertising link. As the leader of the national generation of enterprises, there is no doubt about the strength of POWERCHINA Group, but it is worth mentioning that POWERCHINA Sinohydro Bureau 8 has rich experience in sand and gravel technology and practical operation, which can be regarded as the originator of China’s mechanical sand and gravel research. The latest project progress is summarized as follows:

On the afternoon of June 23, 2015, Zhang Xialin, member of the Standing Committee of the CPC Chizhou Municipal Committee and Executive Vice Mayor of Chizhou City, Anhui Province, and Gao Feng, head of Guichi District, Chizhou City, visited Sinohydro Bureau 8 for a discussion on relevant cooperation issues. Zhu Suhua, executive director and general manager of the company, Huang Min, secretary of the Party Committee, Jiang Qinghua, deputy general manager and other leaders attended the symposium. After the meeting, the two parties held a signing ceremony for the investment framework agreement of the Shenshan Cement Limestone Building Aggregate Project in Guichi District. This is the first time that Chizhou government has publicly disclosed channel information after secretly holding power construction in the Shenshan Aggregate Project, and it is also the beginning of formal talks and efforts to promote the project from behind the scenes to the front desk.

On June 30, 2015, the project cooperation conference between Powerchina and Chizhou was held in Chizhou. Sun Honghong, General Manager of POWERCHINA, attended the meeting and delivered a speech. Yang Zhong, Assistant General Manager of POWERCHINA, General Manager of Infrastructure Department, Zhang Weirong, General Manager of Investment Department of POWERCHINA, Zhu Suhua, General Manager of Sinohydro Bureau 8, and He Zhansong, General Manager of Sinohydro Bureau 13 attended the meeting. Zhao Xinqun, Secretary of the CPC Chizhou Municipal Committee and Mayor of Chizhou, attended the conference and delivered a welcome speech. Zhang Xialin, Member of the Standing Committee of the CPC Chizhou Municipal Committee and Executive Vice Mayor, presided over the conference. The meeting was only 7 days away from the signing of the project agreement between Sinohydro and Chizhou government. The meeting was held in such a rush, and the level of representatives of both parties was very “heavy”. All relevant personnel were present, which shows the importance that PowerChina attaches to Chizhou project. During this trip, the main leaders of PowerChina not only inspected the project base on the spot, but also demonstrated PowerChina’s strong strength in capital operation, project operation, industrial development and infrastructure construction to the Chizhou Municipal Government. The intention is self-evident. Chizhou also hopes to promote local economic green development, ecological development and sustainable development with the help of central enterprises and other enterprises. At the same time, the main person in charge of Guichi District Government introduced the project of limestone aggregate for Shenshan cement and the special line project of mineral product transportation; The main person in charge of the Municipal Transportation Bureau introduced the PPP mode construction project. The two sides exchanged candid views on accelerating the Shenshan project. This marks that both parties have entered the actual working stage on the Shenshan Aggregate Project.

On July 17, 2015, Zhang Xialin, member of the Standing Committee of Chizhou Municipal Party Committee and Executive Vice Mayor, led a team to visit China Power Construction Corporation to discuss cooperation on the project of limestone aggregate for Shenshan cement. Sun Hongshui, General Manager of China Power Construction Corporation, personally received Zhang Xialin and his delegation. He once again emphasized the importance of Powerchina on the Shenshan Project, the progress of the work and the next steps to promote the initiative, and hoped to strengthen the consultation on key issues and communication on details with Chizhou to reach consensus as soon as possible. He said that POWERCHINA will promote project demonstration and investment review according to the original time node, and urge the project to start implementation as soon as possible according to law. Zhang Xialin briefly introduced the recent project work, indicating the attitude and determination to promote the Shenshan project at the urban level. He pointed out that the Shenshan project has such advantages as huge reserves, sufficient market, proximity to the Yangtze River, and is an unrepeatable and non renewable high-quality resource. Chizhou hopes to seek powerful enterprises to participate in the development and operation of the Shenshan project according to the idea of “laying equal stress on development and utilization and environmental protection”.

Three twists and turns: the world’s largest sand and gravel aggregate production base may settle down

According to the latest public information, on September 8, 2015, He Pengcheng, Executive Director and General Manager of Sinohydro Bureau 5 Co., Ltd., and He Tianyi, General Manager of Beijing Huachuan Zhuoyue Investment Co., Ltd. led a team to Guichi District to investigate and negotiate the Shenshan Aggregate Project. The scene of this meeting seems simple, but the author believes that it has more practical value than any previous one. The Shenshan project has a huge scale, with an investment of tens of billions. Without solving the capital problem, it will eventually fail to land. Beijing Huachuan Excellence Investment, needless to say, belongs to the representative party of capital investment. It should be pointed out that Sinohydro Bureau 5 Co., Ltd. is also the capital party. It is not only strong in assets, but also one of its main businesses: project investment and operation. In this way, the financial problem that plagued the promotion of the Nichang Sheng project at that time will be easily solved in the hands of PowerChina.

From the perspective of project progress, the Development and Utilization Plan of Shenshan Aggregate Project has been approved and filed by the Provincial Department of Land and Resources, and is qualified for listing and transfer. The production scale is determined to be 70 million tons/year, which has been included in the provincial “861” action plan. The district government has set up a leading group for promoting large-scale projects and transferred special personnel to work. In the early stage, the city and district level held several rounds of consultations and negotiations with China Power Construction Corporation and Sinohydro Bureau 8 Co., Ltd., reached a series of consensus on project cooperation, and signed the Project Cooperation Framework Agreement and memoranda on related matters.

3、 Industry impact: aggregate market will decline, or the industry competition pattern will be reshaped

Judging from the current progress, Chizhou Aggregate Project is progressing in an orderly manner. Whether its final production scale is 70 million tons or 100 million tons, it will once again break the new record of aggregate industry capacity and become the world’s largest aggregate production base. Based on the analysis of regional location and logistics conditions, Chizhou Aggregate Base will conduct three-level layered market radiation: the first level radiation area is also its core area, which goes up to Wuhan along the Yangtze River and down to Shanghai, including Wuhan, Huangshi, Jiujiang, Chizhou, Tongling, Hefei, Wuhu, Ma’anshan, Nanjing, Yangzhou, Changzhou, Wuxi, Suzhou, Nantong and Shanghai; The secondary radiation area is the secondary core area, mainly along the river to Chongqing; The third level radiation area is a potential area, which carries out long-distance radiation with the help of the main stream of the Yangtze River and sea transportation, mainly including the Changsha area around Dongting Lake, the Jingmen area of the Hanjiang River, the Nanchang area of the Ganjiang River, the Huainan area of the Suqian Canal, the north area of the Yangtze Estuary, and the Hangzhou Bay area in the south.

Three twists and turns: the world’s largest sand and gravel aggregate production base may settle down

From the perspective of competition situation, China Aggregate Network conducted a systematic survey on the operation of the aggregate market in the Yangtze River basin in August. The results show that there is a danger of overcapacity in this region. The actual output of some enterprises has decreased by 30% – 50% compared with the same period last year. The reasons are mainly from two aspects: First, affected by the national macroeconomic environment, the infrastructure is weak, and the construction projects are generally under started, resulting in a significant reduction in effective demand; Secondly, most of the large sand and gravel production lines in the Yangtze River basin were constructed and put into operation from 2013 to early 2015, which has now reached a centralized production release period, leading to the concentration and expansion of production capacity along the river. At this time, China Power Construction Co., Ltd. is growing rapidly, and continues to vigorously promote the Chizhou Aggregate Project, which will undoubtedly further intensify the competition game in the aggregate market in this region. The existing aggregate enterprises in the three-tier radiation market area will face unequal competition pressure. In particular, Huaxin, Gezhouba, Washi, Yadong, Shangfeng, Sinoma, , Conch and other aggregate enterprises located in the core radiation area of Chizhou Aggregate Project will be positively impacted.

We will not comment on the advantages and disadvantages of CEC’s continuing to promote the Chizhou Aggregate Project, but only put forward the following three views: First, the explosive growth period of aggregate demand has passed, and slight increase and even slight decrease will become the new normal of the industry; Second, overcapacity in the region has become an established fact, and expansion and new production lines still exist; Third, the overall cost of post launch has increased rapidly, and the path of pursuing economies of scale has become increasingly narrow.

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