Buoyed by bargains

With its inexpensive, high quality industrial products, ZPMC has become a major supplier to many nations around the world

For Shanghai Zhenhua Heavy Industries Co Ltd (ZPMC), China's largest heavy machinery maker, an around-the-world journey has been kick-started.

With its heavy cranes sold to the United Arab Emirates, wind power products delivered to the United Kingdom and steel to the United States, the Chinese company's global footprint has expanded to more than 80 countries and regions this year.

While the credit crunch is taking a toll on its international rivals, the company is expanding its global presence with its inexpensive products.

ZPMC, formerly Shanghai Zhenhua Port Machinery Co Ltd, last year signed $4 billion (3 billion euros) worth of contracts to produce heavy cranes, large-scale steel structures and offshore engineering products, of which more than 80 percent of the orders came from buyers in the European Union, the US and Asia.

The company is producing a wide range of industrial machinery from heavy cranes, offshore engineering ships, to large steel parts. It had previously only focused on the production of port equipment.

Dai Wenkai, executive vice-president of ZPMC, says the company's strong financing and flexible investment strategies are advantages in competing with foreign rivals. Its heavy machinery and shipbuilding technologies as well as its management network are keys to compete with domestic counterparts.

"Under the current global economic climate, a certain number of international heavy machinery makers are short of cash to support long-term projects and many construction contractors are struggling to complete their projects quickly and to reduce costs," he says.

The problem is clear, Dai says. Foreign governments are making a bigger push to build more infrastructure projects in a bid to boost domestic employment rates, but governments are more cautious in sourcing suppliers for the projects because of limited budgets. He says ZPMC's products are cheaper and are of greater quality compared to competitors.

"We all agree that making high-quality products but with a cheaper price tag is the right signal to show our understanding toward the recession in the West," Dai says.

Take the steel beams that ZPMC supplied to the San Francisco-Oakland Bay Bridge as an example. The company won the deal last year with a $350 million price tag, beating out a Japanese company that asked for more than $600 million and a South Korean company, whose asking price was more than $400 million.

The company currently has steel contracts for bridge projects in Norway, Denmark and Scotland, a contract to provide steel parts for Las Vegas' observation wheel and for the Port of Antwerp in Belgium. Another major reason why ZPMC has succeeded, Dai says, is that it doesn't wait for contracts. It manufactures new products before it has secured an order.

"International buyers come to us because they know we have completed projects and because they believe our products are sound," says Zhao Fangfang, general manager of sales, marketing and management of ZPMC's offshore and steel structure management department.

In 2011, sales for the company reached $5 billion and it expects to accomplish at least $4.5 billion in sales this year. It invested $127 million in research and development last year.

The company has established one institute for heavy industrial products and one offshore engineering institute. In both institutes, there are a total of 25 departments and centers with more than 3,000 designers and researchers focusing on different sectors. They work on the research and development of wind power systems, large steel products, steel bridge modules, shipbuilding and seawater desalination projects.

Zhang Zhenxiong, general manager of ZPMC's technology department, says the firm already possesses the technology to make products that have a longer life cycle, perform better under extreme weather conditions and the methods to use more advanced materials in building steel structures or vessels.

It began to produce its first large-scale offshore oil-drilling platform at its Nantong base in Jiangsu province last year.

To strengthen its offshore engineering capacity and technology, ZPMC's parent company, China Communications Construction Co Ltd, paid $125 million in 2010 to acquire US-based Friede Goldman United, one of the world's leading providers of design services and equipment for offshore drilling rigs.

ZPMC's sales from offshore engineering products totaled $1.5 billion, accounting for 30 percent of total sales last year. Offshore engineering products are expected to account for nearly half of the company's business this year.

"ZPMC has a well-developed production chain to support every business from the initial production, to the date of delivery. And we will invest more in optimizing our production capacity and improving customer services," Dai says.

The company currently owns nine production divisions in Shanghai, Nantong and Jiangyin in Jiangsu province, with a total area of 6,670 hectares. Its coastal branches include 10 km of coastline, including a 3.7-kilomter heavy-duty dock and a 5-km-long deep-water coastline in Changxing.

It also possesses 26 transport ships with a capacity of 60,000 to 100,000 deadweight tons. Zhao says some foreign companies are unable to afford maintaining a large fleet in operations under the bleak economic conditions.

"Still, the world economy in 2012 will remain uncertain as we have seen many trade activities severely affected by the economic turmoil, especially in Europe," Dai says. "We must continue to seek new market growth points to stay competitive in heavy machinery, shipbuilding and offshore engineering industries."

Dai says that ZPMC will build several heavy steel bridge parts and offshore wind power projects for US, European and domestic companies this year. He says the amount of the contracts is large but didn't disclose exact figures.