Distinguish investors and listeners good afternoon. Welcome you to participate in the Baosteel 1H 2023 Results Release. First of all, please allow me to introduce you the VIP guest and Board of Directors participated in today's meeting today. They are the Baosteel Board Director, Mr. Zou Jixin; Baosteel Board Director, General Manager, Mr. Wu Xiaodi; Baosteel Inc. Board Director, Mr. Xie Rong, Baosteel Vice General Manager, Mr. Fu Jianguo and I myself is your old friend, the Vice GM of Baosteel and Secretary of the Board of Director, Ms. Madam Wang Juan. So, as you all know, since the letter half of this year, whether the capital market or the steel industry have all entered a quite downturn and also with this kind of situation, I believe that you start to pay more attention to the industry as well as our company. Therefore, for our company in the half year, what did we do? And in the future, what is our plan? And also for our industries, what is our view? Well, now let's invite Mr. Zou Jixin, the Board of Director of Baosteel Group to make presentation. Let's welcome Mr. Zou.

Distinguish investor friends, good afternoon. I'd like to really thank all of you our dear investment friends for your long-term support to the Baoshan Iron & Steel Corporation Limited. So, now I would like to represent the Company to share with you our performances in the beginning half of this year. And at the same time for our mid- and long-term, we're going to share with you some of our plans. So to give you an overview of the first half of this year, I think that you're all familiar with the whole industry is experiencing a kind of a slump. Everything the last half of last year, up until now in this whole year, we haven't really seen an obvious recovery ever since the last half year of last year, the whole industry has entered into a kind of margin or the border of the loss and profit. So, we have 45% of the loss rate of a CISA member companies and also year-on-year decline ratio of total profit of ferrous metal smelting in the roll industry was minus 97.6%. So, we have also overcome a lot of negative factors and our company profit still ranked number one reached about RMB6.52 billion. And also our revenue reached about RMB170.2 billion and also net profit attributed to the parent company ¥4.55 billion and the cash flow from operating activities, excluding finance company was ¥11.31 billion and EBITDA ¥17.12 billion and EPS ¥0.2 and also ROE 2.32%. So you can see this kind of reduction of the profit was mainly due to the price reduction of the sales of the steel. Therefore compared to the same period last year, there was a decline of RMB18.1 billion. And also the cost compared to last year was also reduced. The cost contribution was…

Thank you very much for director Jixin for your sharing. Just now Mr. Zou shared with us in the beginning half of the year what Baosteel has done and in terms of dealing with the kind of a slump situation in the economic development in the beginning half of this year what they did. But of course, we are still faced with a lot of challenges, therefore, how should Baosteel do? Well, Mr. Zou already gave us a very informative information and also he has introduced about our future goals, but I think our investors still has a lot of concerns and questions. So now we will have more time for our investors. And then we're going to have a Q&A session. So in order that more people will have an opportunity to ask questions, I would like to emphasize that every analyst can only ask one question. So I hope that you can understand that and then we can increase the number of questions of investors. So first, let's invite JPMorgan, [indiscernible] to ask a question.

Board of Director Mr. Zou hello and dear peer leaders, I come from JPMorgan raw material analyst. My name is [indiscernible]. First of all, I would like to congratulate your company for your greater achievements in the beginning half of this year because the whole industry has lost and you still make a good profit. So that very well shows that our company is really leading in the cost of management and the product competitiveness. So my question is to ask you, Mr. Zou, as we all know, the steel demand is weak in China and with this kind of situation. In the future our bigger potential growth is overseas development of the steel. So Baoshan is leading the way in overseas development, and our overseas base is located in Saudi Arabia. So, I want to ask you, what is your future overseas expansion goal in terms of timetable? For example, which countries will you focus on? And apart from building factories, would you also consider acquire some excellent boring assets? Thank you.

Thank you for your question. Our Saudi Arabia project, we all pay much attention to that. And then May 1st in Saudi Arabia, together with our collaborator, Saudi Aramco and PIF, we had the signing ceremony. And after the signing ceremony, various work is being promoted and including global researchers and also some national approval process, et cetera. And also we have signed more than 10 colleagues in Saudi Arabia down to work together with our partner. So for our Saudi Arabia project, we are going to utilize all of the committed resources to be fully committed to build this project. And then with PIF and Saudi Aramco, these kind of partners, so we will enhance on the collaboration with them. And our goal is really to build this project into world's first green low carbon fixed plate steel projects. And after this product comes out, I think its competitiveness will be very high in the world market. At the same time, I hope this project can get very good social effect as well as economic effect to ensure the overall success of this project. Just now, you talked about a steel company making overseas investments or expanding the overseas markets. So I think that globalization is an necessary road for Baosteel to take for internationalization. So in China, speaking of overseas marketing capabilities, it is also about going outside those overseas and also, our R&D system establishment is also about going out. And for the overseas production base investment, during the past three years, we have been working on it. And our principle is, we need to look for as many resources as possible, but make decision in a very cautious way, so that we can have good operation and management. So not only do we have the Saudi…

Thank you for your question and also thank you Chairman for answering the question. Now let's invite [indiscernible] from a Citibank. We focus on like one company multiple bases and in the press conference this concept has been mentioned several times and today we talk about the operation center or business center. So, I'm wondering in terms of our management system, any changes if we are going to have this operation center and why do we have this operation center?

So one company multiple base in Baosteel has been talked about for more than 10 years. In my understanding, one company, multiple based in the history of Baosteel can be divided into three phases. The first phase from or around 2013, we started the construction of Jinjiang at the time. The main task of one company multiple base was to construct a steel production base in a different city regarding talent management of projects, et cetera. At that time we were at a very preliminary stage and after the integration of BAOS another topic came up. So two bases, which are thousands of kilometers apart so how can we exchange information? So at that time we focus on the linking or connection of information, communication and some systematic big change like procurement, centralized, procurement centralized R&D, et cetera. So for me, this is Phase 1 and for Phase 2, because we have four bases and every base, their production level is different, because they are in different development phase and their personnel skills are different. So one company, multiple bases can provide with better management. For example, we have a process department to help each space quickly improve their production capabilities. And of course centering around Baoshan base. So it's about the sharing of management skills, et cetera. Great results had been achieved in that base. For example, the silicon steel, which is very important for the operation of Baosteel and for Jinjiang base. And under the leadership of Baoshan base, the silicon steel production has been greatly improved. And this year, we know this industry is very difficult. But anyway, Jinjiang base is profitable and I believe that has made a solid foundation for Jinjiang base. So this was Phase 2. And why don't we talk about the operation…

Thank you [indiscernible] for your question and thank you Mr. Wu for your answer. And now let's invite [indiscernible] from Citi.

Thank you. My name is [indiscernible]. I have a question. I want to ask the question to Xie is about information quality. So, as the director, how can you make sure that we have good auditing result and quality in order to manage the risk?

Thank you for your question. Well, and I think many other investors want to ask this the same question. Things we started to have the capital market, there have been rumors saying that, some companies actually falsify information. And for Baoshan, we really emphasize the quality of auditing information. So we continue to enhance the financial management system in order to make sure that they have good processes in place and the processes have been put into execution, making sure that, our balance sheet, our financial data are correct and precise. So first of all, in order to make sure that, all the accounting information is correct, you need to have a capable team. The skills of the team, whether they can produce, like, reliable accounting information. This is very important. And we have a very strong finance team, and we have trained a lot of senior management. So first of all, they are very capable. And second, speaking of the accounting, the work of accounting, the accounting policies or rules, and then the interpretation or understanding of the new accounting rules, everything has been done in a very good way. So I think the management team has provided authentic and genuine accounting information. And the second, we need to have a sound and complete system. We have a lot of subsidiaries and branches and the business size is big, but we need to provide centralized accounting systems. This is difficult. So we have made a lot of effort. You can see we have a lot of resources acquired, but we use very consistent accounting rules, and we have invested quite a lot in that. And also, we need to have a standardized accounting work. We have so many subsidiaries, so many branches, as we mentioned, by -- and their…

Thanks Board of Director Xie Rong for your very informative answer. So, I think all the investors after hearing your answer can be more confident to about going data, information quality, and our internal audit and external audit teams can also be more encouraged by your comments and in the future will carry out even more effective work. Now, let's invite the next person from UBS [indiscernible]. Please ask your question.

Thank you Mr. Wu and Mr. Zou and their leaders for sharing. I'm [indiscernible] from UBS. I have a question about the capacities because host you in 2024 that has the 80 million tons of capacity goal. So, how is it being developed up until now? Could you share with us? Thank you.

In our plan, we really also mentioned that next year our capacity will reach 80 million tons. So why do we have this kind of growth of 18 million tons? Well, there are several reasons. First of all, I believe that in the steel industry, we are going to have a high quality development. Therefore, we need to have this kind of requirements of a production. So according to the nation's document requirements for these iron ore steel industry, they encourage the top companies to have reorganization to promote the optimized organization of the industry. So, the country wants to base on good countries to have a reorganization as well as M&A to form one to two very famous companies in these segmented markets. And also the country encourage across region company's reorganizations and merge an acquisition so this kind of M&A can solve the regional problems of scattered distribution of a small and medium companies that produce iron and steel. So BAU Steel is a flagship companies and advantageous companies in the industry. Therefore, in order to satisfy the national high quality growth requirements, we will definitely have our shoulder more responsibilities in this regard. So this is one reason. And another reason is for our future development definitely we need to have this kind of capacity as well. Our company has four base. Over the past decades of development, in talents and in technology, we have all accumulated a lot of advantages. And right now we found that, under the current situation, some of the advantages cannot be brought into for play. Therefore, by means of M&A, we can really share our very good resources and then we can realize our economy of scales. And you can see that our group really do have the ability and experience…

Thank really for your question and, thank you Jixin for your detailed answer. So now let's invite Goldman Sachs [indiscernible].

Hello Mr. Zou. I'm the steel analyst from Goldman Sachs. So, I have a question to ask Fu Jianguo. Actually, I heard that next year, this steel industrial will be incorporated into the National Carbon Transaction Market. So if this is the case, what will be the influence to the industry and what kind of preparation you have done as a company?

Thank you for your question. I think people are interested in this question and we've always been paying much attention to this issue. For the steel industry, the carbon reduction is a very important mission of our industry and our industry and GDP accounts for 5% in China, and a carbon emission we account for 15%. Therefore, in terms of carbon reduction, definitely, it will be a very important mission of ours in the next decades. But as to what kind of technologies should we adopt and at what time should we reform? Well, these are all very important for us. If we move early, then maybe we would make even more cost. But if we move late, then we will be lagging behind in the industry and do not have enough competitiveness. So we are closely paying much attention to this topic and doing researches on it. So on 17th July, we held National Ecosystem Conference, and President raised the opinion in the conference that, in the future, the energy conservation carbon control will transform into the carbon reduction control, energy control. Therefore, in future, we need to also accelerate our pace of action to satisfy the change of national policy. Also, the EUC policy promulgated is also clear, with their stringent timetable. So in the beginning of next year, we are going to apply already. And by 2026, we are going to pay the carbon taxation. Therefore the China steel industry, the challenges we face are huge, because our traditional industry 90% of it is the faster furnace base with heavy assets. So with reform, of this kind of process, it takes much time and a lot of investments. So based on the current situation, this kind of a national policy promotion, including the carbon taxation driving force…

Thank you [indiscernible] for your question and thank you Jianguo for your very comprehensive answer. And next, let's invite from CICC [indiscernible] to ask you a question.

Hi Jen, and thank you all and the management team for the sharing of the results of the first half. And I have a question and that's for all Wu. Recently, we have noticed that some local governments have released their planning regarding the reduction of capacity or output, but from the data we have, it seems that the raw steel, especially like the liquid iron, the production is actually at a very high level. And after September, what is your perspective regarding supply and demand and how the market will be different a place from place or market from market? And how, what is the impact on Baosteel?

Thank you Mr. [indiscernible] for your question. Exactly this is a very heated topic recently. We are in this industry and we can feel that for China, it's a steel making industry. Oversupply has been chewed since several years ago. So starting from 2020, our government has been saying that we need to control the output, control the capacity. And during the past few years, you can see that in terms of the investment, new investment it has been squeezed. So market has a role to play and also the industry government has a role to play and it aims at quality development of China's steel making industry. And I think it is necessary to have a new round of plan or planning for the steel output or capacity. So, I think China's steel making industry will continue to reduce its capacity. This is a trend and it is a trend that has become more and more obvious. And for the second half of this year, how the policies will look like? For this question, I think, Baosteel was strictly follows government's requirement to reduce or control the output. This year the policy compared with last year, the total amount does not change very big, just a slightly deduction. But if you look at the data, you realize that, for the first seven month of this year, our steel production was higher, up by 15 million tons. So throughout the year, if our output is not going to be higher than last year it means in the second half of this year, we have to reduce our production. And I think it will be around 30 million to 40 million tons. And for steel industry I think it's good news because we want to have a efficient production, where there…

Thank you [indiscernible] for your question and thank you Xiaodi for your answer. Next, let's invite from [indiscernible].

My question goes to Mr. Zou for the silicon steel. We know that the price this year has dropped and the reasons and the forecast well, what do you think are the reasons and what is your forecast and what is your planning regarding the silicon steel?

So first of all, the price decline. Why? The reasons, I think the reasons lie and the supplies, because there are so many SEO companies who have business in the silicon steel and we watch news very often. We see this company says we will invest in the silicon steel production lines to produce silicon steel. And a lot of production lines have been put into operation. As a result, you have increased in supply, but the supply outgrowths the demand, so you have over capacity. As a result, so low and mid specs can see oversupply issue more obviously. I think not only it is true to Baosteel, but also for other steel makers. For this like there's low spec, it is very difficult for them to make money, because there's over supply. This is the main reason but for high-end products, especially for high efficient silicon steel. We have the product and the profitability is very good. So for a high-end oriented, so you can steel, the prices are high, the profitability is good, so the problem lies in the mid end and low end over capacity. These do a lot of problems as to the plans from Baosteel for silicon steel. This is our second strategic category. So we have been talking about the plan for silicon steel. Many years ago and a lot of plans were made many years ago and now we are in the implementation stage. So without the plans we couldn't have made so good profitability this year. Speaking of the future, our strategy for silicon steel, we still need to be number one of silicon steel worldwide. What does number one mean? Of course, one thing is production and scale. We need to be number one. We are already number one. We…

Thank you [indiscernible] for your question and thank for director Jixin for your answer. So now we have another final 15 minutes so we can open the floor with two more questions. So want that security then more please answer, ask a question.

Thank you Zhang and also their leaders for sharing. I want to ask you a question just now from the leaders sharing. We can see company's future in terms of improving the product structure. It's very committed. So I want to ask Mr. Wu, so according to the profitability of different products, so what are the top steel products for your company that have the highest profitability right now? What's the ranking?

Well, from the big type of products type, silicon steel definitely number one, and now auto steel and also a thick steel and then steel pipeline. So, these are the ranking for now. As for the big type, there can be different smaller types that have a big difference for silicon steel, they have some type that have a big profit and some also make a loss. In the beginning of this year, for example, those low emissions steel make a loss. And also for the auto steel, they are the same. For some of the products have a lot of demand, for example, electric plating steel product. They have a lot of demands. But if you look at the general products, those that other companies can also make then their profitability is low. So the difference is big among different types of products. But the good thing is that, for Baosteel, we have a very advantageous and a very developed system, so that our detailed profitability of every product can actually be estimated. And so with all this kind of information, we can really adjust very rapidly to the market changes. And then we can also optimize our structural organization. So since the industry is experiencing difficulties, so we always try to make a very good saving of course, every month, there can be some changes, and we will try to respond to that quickly. So in terms of production and sales and R&D, we can have integrated efforts to achieve our goal.

Thank you for your answer.

So, I think this is in line with the performance introduction from Mr. Zou that is our differentiated strategy. Okay, last question for the CICC completion.

So, I'm from [indiscernible] Security. My name is [indiscernible]. I want to ask a similar question. So I think that this year's steel company are all transforming and upgrading the Company. So, this is much in line with the ability of different companies. So for your company, you have also made some progress in the product upgrading. So, I want to ask you for those profits, a good profit steel, such as a new energy steel and a silicon steel and a mid-end and fixed steel, a high energy steel, what is your future plan for the Company for these products? Thank you.

Thank you for your question a very good one. So just like our President mentioned, products and technologies are the key for any company. So for our company, in the industry competition for us to maintain the number one position in the market, we really rely on products and technologies. For what you have mentioned, all these products layout, whether we have the consideration or not and what kind of considerations we have given, yes, of course, we have given all these informations and we have made the related layout and optimization. And these are all the things that we have been always thinking about. And this is the key focus of our work. So you mentioned the silicon steel, in the 2020, by the end of April, at that time, we set up the silicon steel business unit. So then by 2030, how should we develop, we already thought very carefully in our planning at that time. Therefore, for the production volume and also for others, we all developed according to the plan. And in 2019, when we set up silicon steel business unit, before that, our production was less than 800,000 tons. And after setting up the BAU, we didn't invest in new production lines, but with coordination with other bases, now we have reached 1 million tons. And then next year, it will be 1.16 million tons and 2026 1.60 million tons. So these are our high emission silicone steel, which are urgently needed by the market and also for the super high temperature pressure and electrified distributed system for raising the efficiency, we're all adopted. And right now, this year there is a very keen competition in terms of high emission silicon steel in the market. So we've been working a lot on it. So for…

So, thank you, [indiscernible] for your question while you have asked a very good question. So Mr. Jixin was very passionate in answering your question. The time has flies in a -- this is the end of this Q&A session, but we can continue to have communication with your open online question raising platform, and you can give us your questions in the website. And after today's result release meeting, you can also interact with us in the investor hotline or the Shanghai Stock Exchange Interactive Platform or the Shenzhen Platform. So after the presentation and the Q&A part, I think now you have a clear understanding of Baosteel and this industry and I believe that despite the environment is very challenging… [Call Ends Abruptly]