Mining Suppliers Announce China Ventures

Engineering and Mining Journal, Oct 2006

China's rapidly growing economic presence continues to attract mine equipment manufacturers interested in tapping into this gigantic market. Most recently, Caterpillar Inc. and Wire Rope Corp. of America (WRCA) announced unrelated business ventures with governmental and commercial Chinese partners, and Atlas Copco held a press conference to report on the current state of its business in the country.

In mid-September, Caterpillar and China's National Development and Reform Commission (NDRC) signed a letter of intent through which Caterpillar and NDRC will promote the development of China's remanufacturing industry. Caterpillar Group President Stu Levenick and NDRC Resources Conservation & Environmental Protection Department Director General Madame Zhao Jia Rong signed the letter of intent at a ceremony held in September at the Diaoyutai State Guesthouse in Beijing.

"Remanufacturing is a highly sophisticated form of recycling that takes end-of-life components and turns them into like-new products for a fraction of the cost," said Levenick. "Our remanufacturing business is one of the fastest growing parts of our company because this technology helps our customers remain competitive and promotes a sustainable environment by reducing waste and the need for raw materials to make new parts."

Madame Zhao Jia Rong said, "The letter of intent signing lays a solid foundation to promote cooperation in the area of remanufacturing. It is beneficial for China to learn the expertise of foreign countries and to promote the development of the recycling economy."

Caterpillar will provide expertise to assist NDRC and Chinese research institutions in supporting the development of the remanufacturing industry in China. Caterpillar and NDRC have also agreed to form a Joint Working Group on Remanufacturing Programs to discuss matters related to the remanufacturing cooperation program in detail and to coordinate and promote further cooperation by both parties in sustainable manufacturing and other areas.

Caterpillar Remanufacturing Services is the first wholly owned foreign entity to receive a remanufacturing license in China. Caterpillar recently opened a regional remanufacturing center in the Lingang Industrial Area in Shanghai.

Caterpillar has been in the reman business for more than 30 years. In 2005, customers returned 135 million lb of components to Caterpillar Remanufacturing Services. Almost 70% of those 2.2 million end-of-life units were remanufactured to produce Cat Reman products, with the remaining percentage recycled, according to the company.

Earlier this year, WRCA announced the formation of WISCO WRCA Co. Ltd., a joint venture between WRCA and the Wuhan Iron and Steel Corp. (WISCO), China's third-largest steel producer. The joint venture, which is 51%-owned by WRCA and 49% by WISCO, will produce wire rope in China for the Chinese and Asian markets.

WISCO WRCA will build what it describes as the most modern wire rope production facility in the world at an industrial site in Wuhan, located west of Shanghai, on the Yangtze River. WISCO, which is within close proximity of the new rope mill, will be the primary supplier of rod to the joint venture. The 1-million-square-foot facility will be able to produce 50,000 metric tons (mt) of wire rope products when all of the equipment is installed. The facility will have more than 75 major pieces of manufacturing equipment and has been designed with logistics flow and expansion capabilities that would bring total output up to over 100,000 mt at the site by 2010.

According to WRCA, the rope mill's product is exclusively for Asian markets, and will not be exported into the North American market. Total investment in the new venture will be approximately $100 million. Construction of the new plant was expected to start in August and be substantially complete in 2007, with some specialty installations continuing into 2008. The plant is expected to employ more than 400 people.

Ira Glazer, CEO of WRCA, said: "The formation of this new joint venture with WISCO is a great opportunity for WRCA. While the total wire rope market in China is 2.5 times the size of the U.S. market, and there are numerous wire rope manufacturers there, the majority of the product is of relatively low quality. Further, there is a significant quantity of wire rope being imported into China and the amount is expected to increase in the future. The joint venture will benefit from the lower costs of operation in China and the high-quality rod supply from WISCO. We will add our technical expertise to the favorable cost environment to produce a very competitive product for the local Chinese and broader Asian markets. We believe there is great demand for a higher-quality product to enable us to sell out our capacity and eventually expand."

Atlas Copco held a press conference early in September in Shanghai, China, the purpose of which was "to give a deeper understanding of the group's strategy, presence, and ongoing activities in China." The press conference was scheduled in conjunction with a celebration of the arrival of the Swedish ship Gotheborgin Shanghai. Atlas Copco is one of the main sponsors in the voyage between Sweden and China.