Engineering firms make hay from mining moves
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Domestic engineering companies like Sinosteel Corp are reaping the gains from the recent surge in Australian mining deals, thanks to the considerable cost advantages they offer.
Chinese companies have made inroads in the Australian market as they offer engineering services at rates which are nearly 30 percent lesser than other Australian companies.
"With more and more Chinese companies on a resource trail especially in Australia, the need for equipment and construction engineering is also increasing," said Han Shengjian, an official with an export association under the Ministry of Commerce.
Revenue from engineering and construction-related product exports is expected to reach $8 billion over the next three years, he said.
China has been leading the competition in the global resources market and has signed a flurry of deals recently, aimed at significantly boosting its raw material supplies.
Australian gold and copper miner CuDeco Ltd signed a contract with Sinosteel in July this year for engineering-related work at the Rocklands copper project in Queensland. The contract covers the design and engineering work of the 10,000 tons-per-day copper project.
"Chinese companies must not only invest in resource development, but also in the infrastructure needed to successfully complete and run the project," Wayne McCrae, chairman of CuDeco, told China Daily.
Companies like Sinosteel are the best placed to take advantage of these opportunities as they are already present in the resource development sector.
By adding engineering and construction services to the services it offers, it will now be able to undertake the entire gamut of mining operations, said sources.
Some Chinese companies have, however, faced stiff resistance from the Australian authorities on mining deals.
State-owned construction company Metallurgical Corporation of China Overseas, has been facing several problems in Australia, according to chairman Zou Weimin.
The Australian government has, for example, made it mandatory that all Chinese workers must have a score of over five in the IELTS test before they are deputed for projects in Australia.
"If construction workers can speak fluent English, they can easily find white-collar jobs," he said.
Other obstacles for Chinese companies involved in construction projects often include insufficient knowledge on financial and legal aspects, local regulations, wage disparity and accommodation, said Wang Jian, deputy general manger of Sinosteel Equipment & Engineering.
Wang said the company expects to complete the CuDeco deal smoothly. "It would be the first successful mining construction undertaken by a Chinese company in Australia, and it will help us accumulate rich experience," he said.
"Challenges for Chinese companies in Australia are numerous. The occupational and health and safety norms are heavily regulated in Australia. Hence it is important for companies to find the right consultants and legal representatives to address these issues," said McCrae.
"The Chinese companies also need to find the right employees and contractors in Australia to assist them in the various stages of construction like logistics, concrete supplies, earthmoving, cranes and operators, transport, housing and accommodation and engineering groups," he said.
Sinosteel Group first became actively involved in the Australian resources sector with the signing of the Channar Mining joint venture agreement with Hamersley Iron in 1987 and acquired a 40 percent stake in the Channar iron ore mine in the 1990s.
The company also made a successful $1.36 billion bid for Australian mining company Midwest a couple of years earlier and the venture started its first shipment of iron ore in December 2009. Last June, Sinosteel won approval to mine ore at Koolanooka in Western Australia.
China's overseas construction engineering contractors clocked revenue growth of over 37 percent in 2009 to $ 77.7 billion compared with the same period in 2008, according to data from the China International Contractors Association.
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