Companies

Sandvik builds on China experience

By Zhou Yan (China Daily)
Updated: 2010-11-25 14:00

SHANGHAI - Western construction machinery firms are turning rocks into gold in the world's second-largest economy at the height of its urbanization progress, seeking robust business growth to offset exposure to their ailing home markets.

Sweden-based Sandvik Mining and Construction (SMC), which provides equipment for rock drilling, demolition, and bulk-materials handling, set a target to increase its Chinese business, which is expected to grow into the firm's biggest cash cow, by between 25 and 30 percent by the end of the year.

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That's compared with the drill-rig maker's projected global increase of 9 percent in the upcoming years.

"We're so far satisfied with our performance in China, and our growth there surpasses the industry average," said Thomas Schulz, president of SMC's construction section. "From a growth point of view, China is definitely number one in the world what has happened in China has influenced the industry globally."

According to the management consultancy Off-Highway Research, the sales volume of construction equipment in China will reach more than 300,000 units in 2010. That would see it outstrip Europe and North America, in which demand declined sharply between 2007 and 2009. Both are expected to total fewer than 100,000 units this year.

China's demand will account for almost half of the global total, which is projected to reach approximately 680,000 units this year and to touch 700,000 in 2011.

"The global economic recession brought China to a leading position (in the construction sector) in a very short time," said Schulz.

As such, the Nordic demolition tool provider launched a research and development facility in Shanghai in August to design drills especially tailored for the Chinese market.

The move followed the announcement that SMC will open its largest production facility in Shanghai's Jiading district.

"More projects are ongoing and will materialize in 2011," said Janne Uotila, manager of the Sandvik Product Development Center in China.

Indeed, competition in China's construction machinery market has become unprecedentedly fierce, as companies from home and abroad snap up infrastructure projects on the back of an accelerating urbanization process that will add more metro lines and intercity high-speed railways.

Sales of excavating machines by China's major 23 manufacturers rose 23 percent year-on-year to reach roughly 95,000 units in 2009, China Excavating Machinery Network said.

Even during the industry's deepest recession globally in the past two years, the number of local construction-machinery players is increasing that those companies are honing their competitive skills, said Schulz.

He added that the increasing numbers of participants will push the company to perform more strongly and grow most robustly. "We're open to everything," Schulz said when talking about possible purchases of its local peers.

SMC also aims to expand its reach into central west China on the back of the government's "Western Development Policy", said Antonin Beurrier, president of East Asia Region of SMC.