CIMC Enric (Hong Kong stock code: 3899.HK) are pleased to announce that a subsidiary, Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd.and Shijiazhuang Enric Gas Equipment Co., Ltd., secured over RMB400 million new orders for LNG on-vehicle cylinders in August and September, representing a YoY growth of over 80 times, and the cumulative new orders for on-vehicle cylinders from January to September 2023 exceeded RMB700 million, representing a YoY growth of nearly 34 times and a YoY growth of nearly 3.4 times compared with the same period in 2021. A new intelligent production line for LNG on-vehicle cylinders of the Company has been in partial trial production and is expected to be fully completed in the first quarter of 2024. After the first phase of its production, the maximum annual production capacity of CIMC Enric's LNG on-vehicle cylinders can be up to 200,000 units/year, which is a doubling of the production capacity, and it can be flexibly arranged to regulate the supply capacity in accordance with the market demand on single or double shift working system.
Since 2023, the economics of natural gas heavy-duty trucks have come to the fore as the oil-gas price differential has continued to widen and sales have climbed. According to the National Bureau of Statistics, LNG prices stood at RMB4,370/ton as of 30 September 2023, down 48% from the 2022 high (RMB8,437/ton) and 39% from the end of 2022 (RMB7,168/ton). Meanwhile, diesel prices remained high, which climbed to RMB8,506/ton as of 30 September, and the gas-to-diesel price ratio fell to 0.51 from a peak of 1.06 in 2022. The economic advantages of natural gas heavy-duty trucks, have reasserted, leading to an explosion of demand growth.
Data show that the cumulative retail sales of natural gas heavy-duty trucks from January to August 2023 totaled 83,000 units, with a cumulative YoY growth of 202%, and the sales of natural gas heavy-duty trucks in August even reached 19,000 units, with a significant YoY growth of 562%. The penetration rate of natural gas heavy-duty trucks has also increased sharply from the previous level of about 5-10%. In August, the penetration rate of natural gas heavy-duty trucks reached a record high of 36%. Benefiting from the natural gas heavy truck market that continues to maintain a high degree of prosperity, the Company's LNG on-vehicle cylinder orders and deliveries have increased significantly.
Institutions predict that with OPEC cutting production and the reduction of Russian diesel exports, international oil prices will remain high or even rise further, so the oil-gas price differential is expected to be maintained or even further expanded. In addition, the stricter National VI b emission standard was officially implemented nationwide on 1 July 2023. The carbon emission of natural gas heavy-duty trucks is half of that of diesel heavy-duty trucks, which is currently one of the best solutions for long-distance trunk transport. Therefore, the growth momentum of the natural gas heavy-duty truck market is expected to continue, continuing to drive the market demand for LNG on-vehicle cylinders.
Source: National Bureau of Statistics, Economy range: Diesel market price * 0.8 > LNG market price
Against this background, CIMC Enric is continously optimising its production lines and increasing its production capacity. In addition, it is building a new intelligent production line for LNG on-vehicle cylinders, creating an industry-leading digital workshop, realising comprehensive digital management of planning, logistics, quality, equipment and energy consumption, and upgrading the level of automation and intelligent production, so as to further increase its production capacity and cope with the soaring demand. The new production line has partially realised trial production, and is expected to be put into full operation in the first quarter of 2024, which will further increase the production capacity significantly.
Mr. Ju Xiaofeng, Vice President of CIMC Enric and Head of Energy Equipment and Engineering Business Center, stated, “Under the goal of carbon peak and carbon neutrality, the green transformation and development of the heavy-duty truck industry is imperative. The implementation of the more stringent National VI emission standard for heavy-duty trucks and the widening of the oil-gas price differential have driven the rapid recovery and explosive growth of the natural gas heavy-duty truck market, with the supply of LNG on-vehicle cylinders exceeding the demand, and the market boom of natural gas heavy-duty trucks expected to continue in the coming years. The brand and product quality of the Company's LNG on-vehicle cylinders are widely recognized in the market. We have established close strategic cooperation with the market leaders in heavy-duty trucks, and this year's new orders for LNG on-vehicle cylinders have achieved breakthrough growth. At present, the two main producers have optimised the allocation of resources, the average daily production capacity continues to hit a new high, in order to meet customer demand. Additionally, the new intelligent production line is under construction, grasping the market opportunities.”