Metso (HEL:MEO1V)

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Metso in China

The urbanization and industrialization of China is strongly boosting the demand for energy, basic metals, paper and packaging materials, and aggregates used in construction. Metso has a solid foothold on the growing markets of the world’s most populated country. Metso employs approximately 1,850 people in China including joint ventures. In 2005, China was Metso's fourth biggest country in terms of net sales i.e. EUR 239 million.

The explosive growth in housing construction and major infrastructure projects are a big challenge for China’s producers of aggregate. Metso Minerals has been delivering machines and equipment to them since the early 1990s. The construction boom is expected to continue for at least the next decade as people migrate to the cities.

Because the big cities like Shanghai are reaching their capacity, new regional growth centers have emerged in China. Metso Minerals is recruiting and training more sales and customer support professionals and is establishing regional units close to its customers.

The mining companies producing basic metals and coal in China are another important customer group for Metso Minerals. The global mining super cycle started by China is projected to continue for the next ten years, and possibly even longer with India’s help.

Customers expect quick action

Metso Paper is the market leader in China where its customer base includes all the major local and global producers of fiber, board and paper. A solid track record and a trusted brand name give Metso Paper an edge in a market where customers expect suppliers to operate clearly faster than in Europe.

The service business accounts for a relatively small portion of Metso Paper’s net sales in China because the majority of the machines delivered there are new. However, the importance of service will increase because customers are striving for continuous improvements in productivity. This requires Metso Paper to offer preplanned maintenance services and high standard, respected local technical support for customers. A good example of this is the agreement made public in February concerning the acquisition of a paper machine manufacturer, Shanghai-Chenming Paper Machinery, in the Shanghai area. When finalized, the acquisition will improve service not only for the Chinese but also for the pulp and paper industry in Asia.

Metso Paper also has a successful joint venture in China, Valmet-Xian Paper Machinery.

Demand for paper will grow 4.5%

Jaakko Pöyry Consulting estimates that the demand for paper products in China will grow 4.5 percent a year over the long term. Industries that use a lot of packaging have established a presence in China. Forest companies operating in China are currently focusing the bulk of their investments on fiber and board lines.

Energy automation to strengthen

Metso Automation offers solutions and field equipment to China’s energy and hydrocarbon industry and its pulp and paper industry. The strong demand for automation solutions in a country with a low-cost and flexible labor force is a good indication of industry’s confidence in continued economic growth.

Metso Automation’s customer base includes all the major state-owned energy companies and the majority of the biggest forest companies operating in China.

The ordering of comprehensive packages a trend that is gaining strength in China’s forest industry. Metso is the only company in the world that is capable of providing the customer with completely automated pulp and paper production processes on a turnkey basis. On China’s growing markets, this has been a huge marketing edge also for Metso’s automation products and has dramatically added to the local demand.

Metso Automation expects its strongest growth in sales to come from its role as a supplier to the energy and hydrocarbon industry. China’s economic growth is dependent on hydrocarbon industry and energy company investments that are necessary to meet the energy needs of the growing pulp and paper industry.

Brand is very important in China. Metso’s brand promise of high quality products and services, reliability and expert support locally has indeed helped advance the automation business in Chinese industry.

China’s economy in brief

China’s gross domestic product has grown strongly for nearly thirty years and has been over 9 percent annually since 2003. The growth has been spurred by the export industry and investments funded primarily from domestic savings.

Agriculture accounts for about 14 percent of China’s GDP, industry (including construction) accounts for some 53 percent, and services about 33 percent.

In terms of purchasing power parity, China, with a population of over 1.3 billion, has the world’s second-biggest economy after the United States. One in ten people in China live below the poverty level. The hundreds of millions of underemployed people in the rural areas make continued economic growth possible. The comparative advantage of China’s production is in labor-intensive products, also in the long-term.

References

Metso in China [1] [2]