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天马行空的Jussi

关注亚太地区的社会与经济发展及EPC行业动态。

 
 
 

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Regarding how to strengthen marketing effort in China  

2009-04-01 14:58:40|  分类: 行业新闻 |  标签: |举报 |字号 订阅

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 As a rapid growing economy, China’s EPC market has huge potential, which is especially a case when Chinese government just announced a 600 billion USD stimulus package plan in a bid to tide over the financial turbulence.   

To most of Korean Engineering companies, in the past decade, the degree of openness of Chinese EPC market was not so high, which is a fact attributed to the fast muscle growth of indigenous EPC companies, and China’s protectionism tendency is another factor to blame.   

First tier home EPC companies such as SEI(strong in building refineries), HQCEC(strong in building Petrochemical plants) and Chengda(strong in building fertilizers, thermal power and polysilicon projects)  have accumulated enough experience when successfully completing many domestic refinery and petrochemical projects, which is the successful result of China’s “ market for technology” strategy. A good example is, 15 years ago, SECL, with the assistance of HQCEC, had built petrochemical plant for Jilin Petrochemical, but this is the only influential   petrochemical project for SECL to its pure Chinese client.

However, this does not mean the happy time for foreign EPC companies in China has come to an end, as long as you still have comparative technology advantages, you will not be thoroughly squeezed out of China’s market. For instance, Linde China is seen to have a finger in the pie of Dushanzi PE Complex Project and Dezhou Nitrogen Fertilizer Plant with their proprietary patent technology. So, it’s high time that SECL beefed up R&D input. Other than developing the comparative advantage in technology, SECL can focus more on foreign funded projects, especially those Korean invested ones.  But recently there is a trend that more and more China based foreign clients are turning to local EPC companies for easier solution, given the fact that they can deliver a faster completion and be more cost effective, say, Hanhwa Ningbo 300,000 ton/year PVC/VCM  project has been awarded to Chengda Engineering, and Sinopec-SK joint 800,000/year PE project(SK holds 35% of stake) might have gone to SEI.  Unavoidably, in case SECL wants to build more success in China, it needs to consider a head to head competition against Chinese competitors.

To expand market share in China, firstly,  the support from local peers are inevitable. To the best of my knowledge, Technip is the only Grade A construction certificant in China, thanks to the effort from their joint venture partner-Tianjin Tianchen Engineering company. Japanese Toyo is the Grade B certificant, which is a benefit developed from their long term partnership with HQCEC, if you take a look at those project managers’ background, most of them have 1-2 years training experience in either Toyo or Technimont headquarters.  Taken in this sense, SECL can consider how to strengthen ties with local counterparts, such kind of strategic relationship will not be only confined in China, in the long run, it can be also utilized to serve some projects outside China as well. ( for details, I would like to elaborate later)

Secondly, there are not only petrochemical projects in China, but also industrial and environment projects, especially the environment plant, with the ascending attention to its environment problem, China has pledged to invest vast money into this sector in exchange for a better social effect, so, in a foreseeable period of time, there will be many environment friendly projects emerging, such as waste water treatment(including Coking Wastewater, Textile and Chemical Wastewater, Oily Wastewater, Tannery Wastewater, Pharmaceutical Wastewater,  Fermentation Industry Wastewater and Papermaking Wastewater etc.), seawater desalination(don’t forget that many coastal parts in China is hit by fresh water scarcity, which has become a bottleneck to local economic development, for example, Dalian is considering to start more desalination plants.  However, not many local solution providers can utilize all the 3 most popular methods--LT-MED, R.O. and electrodialysis)  and Solid waste treatment etc.  To get involved in environment projects is commensurate with SECL’s development strategy as SECL is endeavoring to diversify its business scope and product portfolio. But how to get started in China, I think we can introduce the definition of  investment project.(We can come to details later)

Thirdly, to compete against Chinese competitors in their home field, cost factors can never be ignored. If we look at the cost split-up of an EPC project, just as the name implies, it consists of three major parts, that are, Engineering cost, Procurement cost and Construction cost,  among which, Procurement and Construction account for around 80%  of total cost. While Engineering calls for more effort from home office with our advantageous technology well incorporated, I believe that, to reduce cost, localization of P and C is the best way to deal with local contractors just as how they will deal with us. After setting up our margin target, localization of equipment manufacture and manpower employment shall be considered to the biggest extent as long as it can be accepted by the client. Nowadays, more and more China made products are gaining trust from foreign clients, not to mention domestic clients. For example, in last December, China First Heavy Industry Corporate just signed a 143 million Euro worth of hydrogenation reactor contract with Daelim Industrial Company for Iranian ESFAHAN refinery project; Hyundai steel project has awarded Shanxi Blower company contract of Top Pressure Recovery Turbine, and from Air Liquide, France it has received centrifugal compressor contract. These items, either stationery or rotary, are normally hardly considered acceptable by SECL. As to how to alleviate SECL’s doubt about placing P.Os to Chinese vendors, attached please find an abridged Q&A written in last year for our division.

To put it briefly, to expand market in China, I suggest we strengthen our effort from the following aspects:

1.    Develop strategic partnership with local EPC contractors for a facility to future cooperation.

2.    Attach more importance to China environment and energy saving related projects by introducing into investment project definition.

3.    Start from the proposal stage, try to maximize the localization of procurement and construction so that the total cost can be reduced to the minimum extent.

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