Confronting excess capacity

Huaxin Cement Co. Ltd, founded in 1907 as one of the first Chinese cement enterprises, leads the domestic cement market. But Chen Zhi, manager of the Process Department and Technical Director, sees dark clouds hanging over the business. “China’s cement industry has had a problem of excess capacity since 2010,” says Chen, who has worked at Huaxin for more than 20 years. “There is little market share or room to make a profit. For example, Huaxin, along with other large cement companies, has made far less profit in 2012 due to intensified competition, although we are implementing good cost control measures. Poor management has caused many medium-sized and small cement companies to run at a loss.” The cement industry is heavily dependent on the speed of economic development. “Even when the national economy picks up, it will still be quite difficult for the cement industry to generate profit as a result of excess capacity,” Chen says. That’s why Huaxin has turned its focus toward two other business areas. “On the one hand, we have started to extend the industrial chain and engage in the concrete business,” says Chen. “On the other hand, drawing lessons from Europe and America, we have entered the field of environmental protection, with a focus on urban waste and sludge treatment.” Huaxin expects to invest about SEK 10.6 billion (RMB 10 billion) in the environmental protection business in the next 5–10 years. For Chen, the transition is a natural one. He says the attaches great importance to environmental protection and sustainable development. “In terms of mining, we usually adopt standardized methods, such as benching, and prioritize land reclamation and re-greening by planting trees and grass,” he says. “As a large company with social responsibilities, we must take mining plans, resource utilization and water and soil conservation into consideration. I believe only large corporations with strong financial and technological strengths can deal with the environmental protection business.” In 2001, Chen had to solve an air supply shortage when he was responsible for the renovation project of a cement grinding station in Huangshi, Hubei. Although screw compressors were relatively new to China’s cement industry at that time, technicians at Huaxin saw that Atlas Copco’s 10-cubic-meter miniature compressor units (GA55-7) produced less noise and consumed energy more efficiently. Placing a high value on the stability and quality of its air supply, Huaxin purchased the Atlas Copco screw compressors. During 2003-2005, many Chinese-made screw compressors became available, and Huaxin also bought some of them. However, Huaxin sets a high requirement on the reliability of compressors, in particular the lubrication of bearings and the reliability of the control system. “We found that Atlas Copco’s compressors were most trustworthy in terms of technology, quality and service,” says Chen. “Working at the center of a cement plant, compressors have a huge impact on the reliable operation of the plant.” Since then, Huaxin has purchased many more machines from Atlas Copco to meet the needs of its business expansion. More than 80% of the machines used by Huaxin – including drilling rigs and stationary and portable compressors – are from Atlas Copco. For drilling applications, Huaxin mainly uses XAMS850 and XAVS900 compressors. “They always take first place in the annual assessment of our suppliers,” Chen says. After working on several projects, Huaxin has built up a relationship with Atlas Copco, which also provides technical support and training regarding daily maintenance of the machinery. “Few domestic manufacturers offer a pre-sales service, which Atlas Copco does well,” says Chen. “When we talk about compressors, the maintenance staff at our plants prefer using those manufactured by Atlas Copco. I think this is an important recognition.” In the near future, Huaxin will broaden its focus away from the cement business. “The concrete business includes the aggregates sector which is closely related to portable compressors used in almost all the mines in Huaxin,” says Chen. “Also, a few miniature compressor units may be used in our green business.” Huaxin Cement Co. Ltd is one of China’s first cement companies, founded in 1907. Its cement has been used in many key national projects, including the Three Gorges Dam and the Wuhan Yangtze River Bridge. Huaxin also engages in the fields of premixed concrete, cement equipment, cement packaging and waste treatment. The first decade of the 21st century saw Huaxin’s rapid expansion from the Hubei market (where its headquarters are located, in Wuhan) across China. The company’s annual production capacity has increased from 1 million metric tons in the early 1990s to about 60 million today. Since 2011, Huaxin has expanded its business overseas with an ongoing project in Tajikistan and a Cambodian project in negotiation. At present, Huaxin has more than 40 branches or subsidiaries across China and more than 11 000 employees. With total assets worth more than SEK 19 billion (RMB 18 billion), the company is ranked at the top of the domestic cement industry.

The perfect fit

The Road Construction Equipment Division is a leader in asphalt and soil applications. The division produces a wide range of robust pavers, asphalt and soil rollers, and milling equipment. China is one of the world’s largest markets for road construction equipment, fueled in recent years by massive investments in infrastructure by the Chinese government. With local and international brands in the mix to provide equipment, the competition in this segment is fierce, says Ihab El Dessouky, the division’s Vice President Marketing – East, Atlas Copco Road Construction Equipment Division. “We are investing in our production unit in China and developing new and exciting products that fit the market’s needs,” says El Dessouky. “Chinese customers tend to go for big machines with maximum output. It’s quite common at many construction sites to have pavers working on nine-meter widths, together with tandem rollers that are more than 12 metric tons and soil rollers heavier than 20 metric tons.”

Matching market needs

The Construction Tools Division in China offers both the Atlas Copco brand and the Shenyang brand for hydraulic breakers and hand-held pneumatics. A number of infrastructure projects are underway in mainland China, Hong Kong and Macau and, in many cases, large excavators are required. Thierry Leder, General Manager, Construction Technique, says there have been more 30-metric-ton breakers sold this year than in previous years. “Greater China is the largest hydraulic breakers market in the world,” he says. “It is also a very competitive market.” That’s why having the right product offering is crucial; Atlas Copco offers dedicated products that match the needs of the Chinese market. A new range of hydraulic breakers, the C-Series, was recently launched to complement the company’s premium range breakers and broaden the customer offering to suit all needs (see back cover). “In the near future, Atlas Copco’s Construction Tools Division will become a key partner for Chinese users in the construction market,” says Leder.

The big payback

Based in Tianjin, China, the Services Division focuses on the total life-cycle cost of equipment – an approach that comes with a commitment to the buyer. With the purchase of a product, the customer can get lifetime service from Atlas Copco. “By selecting original parts and services you will get the biggest payback,” says Hui Jiang, Parts and Services Manager. Jiang points to the importance of uptime and efficiency. “Some customers are initially hesitant about the cost of spare parts, until they realize that our products, which are of a higher quality, have fewer breakdowns compared with local consumables. In addition, customers don’t have to pay extra for services, as those are included in the contract.” Getting service from the original customer center is the most economical approach for customers in the long run, says Jiang. “Many customers switch to Atlas Copco when they realize that they will have fewer breakdowns with our regular service and maintenance solutions. Within three to five years, they will also see a reduction in annual spare parts costs of about 15%.”

A greener plant

The Industrial Air and Portable Energy Division will have a new production plant up and running in November 2012. Located in Wuxi, China, it will produce portable diesel and electric-driven compressors and generators, and small- to medium-sized industrial air compressors and GAR break compressors. The plant is designed to produce up to 34 000 compressors a year. The new plant is certified by Leadership in Energy and Environmental Design (LEED) for sustainable site development, energy and water efficiency, use of natural materials and resources, indoor environmental quality and innovation in design. The plant features an energy recovery system. “We will be reusing the energy from the production testing equipment to heat the plant in winter and then reverse the system to cool the plant in summer,” says Eric Langmans, General Manager, Atlas Copco (Wuxi) Compressor Co., Ltd. The office and workshop will use environmentally friendly T5 lamps, and rainwater recuperation will take place for general cleaning and landscaping. “Lean manufacturing, automated flow lines and the use of ergonomic assembly equipment, such as manipulators and lifting devices, will make this plant a modern, state-of-the-art production location within the Group,” says Langmans. Written by Jill Zhang