International miner giant increases purchase of Chinese manufacturers in China to share mining feast

While BHP Billiton, Rio Tinto and other mining giants are booming in the sale of iron ore and other resource products to Chinese steel mills, a group of Chinese manufacturers and equipment manufacturers have begun to dig and enjoy the opportunities brought by this mining feast.

"This year, our modular construction revenue is about A$100 million, accounting for a quarter of the company's total revenue, and it is expected to account for more than half of the company's output value next year."

Xinbao Zhongji Containers Co., Ltd. (hereinafter referred to as “Xinhui CIMC”) Managing Director Zhang Baoqing attended the first BHP Billiton Supplier Awards Conference held in China yesterday. BHP Billiton’s campsite in Australia’s mine project It is an important source of Xinhui Zhongji’s income from modular construction this year.

In 2010, Xinhui CIMC obtained a five-year exclusive strategic supply contract for campsites from BHP Billiton. Within 5 years, CIMC will supply campsite houses and related supporting public facilities to the BHP Billiton West Australian iron ore mine for approximately 10,000 people. The contract amount is about 300 million U.S. dollars.

As a subsidiary of the traditional container giant CIMC [12.40 -7.39% shares in Bar Research], Xinhui CIMC is currently the world's largest special container manufacturer, but it can be said to be a novice in the field of modular construction. From the container to the business development of the camp room, Zhang Baoqing frankly stated that "it's not easy to come by".

When the financial crisis broke out in 2008, the company's traditional container manufacturing business suffered a major impact, which made Xinhui CIMC aware that it must transform itself from a mere bulk manufacturing of container business.

At that time, the rapid development of the mining industry also gave CIMC a chance to transform itself. In 2009, the company won the BHP Billiton West Sea Iron Ore Project Modular Camp House project after being evaluated through multiple layers of bids and evaluations and became the first Chinese camp house supplier for BHP Billiton.

“After we won the bid, many people did not believe that we could do it because BHP Billiton had very high requirements for camp accommodation. As a result, 200 camp sites in our first batch of orders were delivered within 60 days,” said Zhang Baoqing.

The ability to deliver at a shorter time than foreign suppliers to meet the needs of mining companies to expand their horsepower is one of the important reasons why BHP Billiton and other mining companies have increasingly turned purchase orders to Chinese suppliers.

BHP Billiton’s Chief Purchasing Officer Dirk Van De Putte pointed out to the “First Financial Daily” that at present, BHP Billiton has conducted six feasibility studies or pre-feasibility studies for six expansion projects worldwide, which require stable and timely sources of supply such as equipment and consumables, while China’s In addition to the advantages of suppliers in terms of cost, they are also much faster than foreign suppliers in terms of delivery time. At the same time, the quality of Chinese suppliers' products is also increasing, and they are willing to invest in R&D and innovation.

BHP Billiton also began to increasingly tilt its purchase budget toward China. Dirk Van De Putte told reporters that when BHP Billiton China Procurement Center was just established in 2007, the annual purchase volume in China was less than 100 million U.S. dollars. However, by the end of this year, BHP Billiton's purchases in China will reach 800 million U.S. dollars, and the planned purchase amount next year is expected to reach 1 billion U.S. dollars. The purchase volume in the next five years is expected to reach 6 billion U.S. dollars, which is more than double the total purchase volume in the past five years.

The general manager of Rio Tinto's procurement for the market, Ma Changjiang, once told reporters that due to the expansion of the Australian iron ore project and the promotion of large-scale mineral projects such as Simandu and Mozambique in Africa, Rio Tinto’s purchases in China in 2011 will exceed the expected 1 billion. The US dollar, the 2012 budget will be expanded to 1.5 billion U.S. dollars.

However, Ma Changjiang once pointed out to reporters that there are still some gaps between China's suppliers and foreign suppliers in the post-export service.

Assistant president of Zhengtai Electric, who provides transformer products for mining enterprises, told reporters that after-sales service is indeed a relatively big challenge for Chinese suppliers. This is an indispensable requirement for BHP Billiton and other mining companies to select suppliers. On the other hand, the establishment of a after-sales service network and the provision of after-sales service personnel in foreign countries also require significant costs. At present, the company mainly employs local personnel to provide after-sales services.