Companies

Sandvik digs deep for growth

By Liu Yiyu (China Daily)
Updated: 2010-04-07 09:41
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Beijing - Sandvik Group, a Swedish engineering firm, expects its sales in China to record double-digit growth in 2010 after a slowdown last year, mainly boosted by sales from mining machinery as China's demand for mineral resources such as gold is likely to double over the next decade, according to Svante Lindholm, president of Sandvik China.

"China is becoming one of the major mining markets and there will be constant robust growth in the future," said Lindholm.

China is currently the fourth largest market for Sandvik Group, representing 7 percent of its global business, according to Lindholm.

Sandvik's mining and construction sector, the largest revenue contributor for the group and accounting for 45 percent of its global business, plunged 90 percent globally but was the only profitable sector last year.

"Our mining and construction business in China will grow by over 90 percent despite the global slowdown in this sector," Lars Josefsson, president of Sandvik Mining and Construction said when the group opened its largest factory in China last year.

Meanwhile, Komatsu Ltd, the world's second-biggest maker of large dump trucks and excavators, expects sales in China to rise by half as the country's 10-percent growth rate drives demand for resources such as coal and iron ore.

Demand from China has pushed up raw material costs, with iron ore and copper prices doubling over the past 12 months, according to Bloomberg Data.

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China's mining industry consolidation will also benefit high-end machinery makers, such as Sandvik Mining and Construction. "The larger the miners are, the more they focus on productivity, automation and security - and large miners have more resources to buy equipment," said Lindholm.

The industry as a whole is becoming more high tech. "Mechanization is the trend in the mining industry because of security issues and rising labor costs, which will definitely benefit mining machinery makers," said Guo Qiang, an industry analyst at First Capital Securities.

China closed 1,088 small coal mines in 2009 as part of efforts towards mining industry consolidation. While small mines are being closed and merged, the development of large State-owned mines are being promoted and production efficiency is expected to be further enhanced.

Shanxi province expects its coal output to rise by up to 30 percent in 2010.

"Despite the country's determination to develop new energy, China will continue its reliance on coal for a long time," said Zhang Shengqi, secretary general of the Association of Mining and Processing Equipment affiliated with China Heavy Machinery Industry Association.

Coal miners and iron ore producers are the largest customers for mining machinery makers, according to Zhang.

"Foreign machinery makers are more advanced in deep mining and own core technologies of certain kinds of machinery, prices of which, therefore, could be two times more than domestic products," said Zhang Shengqi.

But they are also facing fierce competition from Chinese coal-mining machinery makers such as Tian Di Science & Technology Co.