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Major contract from China ensures thick order books
Full utilisation of capacity beyond 2004
BVV • Bochumer Verein Verkehrstechnik GmbH (BVV) will deliver at least 10,000 locomotive wheels with a total value of around € 12 million to the People’s Republic of China. The five different wheel types have running tread diameters of 1,250 mm and 1,050 mm and will be used there as basic parts for a variety of locomotive wheel types. The order ensures thick order books for BVV beyond 2004.
Signed in June, the contract is the preliminary result of some intensive groundwork preceded by technical and commercial negotiations which led to a trial order in February this year. Bochumer Verein forged and initially delivered 4,255 locomotive wheels with a value of approx. € 3 million—a delivery which succeeded in fully satisfying the expectations of the Chinese customer. In order to examine the performance potential of the Bochum-based company in more detail and in person, Chinese experts visited individual departments at Bochumer Verein in mid-May. The delegation comprised decision makers from the Chinese Railways Ministry and the China Academy of Railway Sciences (metal & chemistry research institute). During the visit, BVV was able to display its competence and efficiency in all areas—and thereby lay the foundations for stable supply contracts.
The Chinese guests took a very close look at BVV (from left): Andreas Dal Canton, Mr Li, Werner Kartelmeyer, Thorsten Schürmann, Dr Ingo Poschmann, Prof. Zhang Bin and Hans-Albert Pöll.
BVV’s Chinese contractual partner is an established Chinese trading company—the Xuan Yuan Group. This trading company formed the link to the end customers—the China Railway Supply Corporation, a sub-department of the Chinese Railways Ministry and a locomotive manufacturer at the same time.
Successful teamwork thanks to the quality of products originating from the forge in Bochum and convincing work performed by the trading company made it possible for BVV to assert itself over the previous Ukrainian supplier and other European manufacturers of basic locomotive wheels. The contract is also however associated with high demands: the Chinese partner expects a consistently high level of quality and the appropriate loyalty to delivery deadlines. Bochumer Verein can be proud of the fact that it is the first German manufacturer to supply spare locomotive wheels for the Chinese market—a privilege which also requires all of its capacity. Even preparation for this major contract represented a huge challenge on account of the large diameter ranges and requisite materials. Particular attention must be given to quality and documentation thereof as well as logistical control of all processes. Add to this the fact that the contract comprises considerable piece numbers and long delivery periods. Considering the current turbulent steel market and high price policies for scrap, coke and crude steel, this represented a commercial balancing act on the part of BVV. On the one hand, it was necessary to communicate to the customer that quality has its price, while still staying competitive in terms of prices. During the period from February until conclusion of the contract in June, preliminary material rose in price by more than 30%, for example—not least owing to the sustained demand from China and other Asian markets. But these requirements are well-known and demand efficient solutions every day for performance of the contract.
After all, the desire is to obtain follow-up contracts on this market which offers enormous potential for growth. Huge potential, in fact—experts estimate that the import requirements in terms of locomotive wheels could be up to 30,000 pieces a year. Domestic industry in China is currently unable to meet this demand although the country is in the process of building new forges for rolling stock. What’s more, China has considerable catching-up to do in developing its infrastructure which includes the railway network. Over the next few years, the Chinese economy is expected to grow by at least 8%—an increase which will also trigger growing demand for railway material for the development of passenger and freight transport. This growth rate is even expected to be up to 15% in congested urban areas. Additional requirements for the infrastructure of railway transport are also currently attributable to the Olympics to take place in Peking in 2008 and the Expo in Shanghai in 2010. What company wouldn’t be interested in being part of it all? On the other hand, the risks should not be ignored—for example, the permanent energy crises prevailing in the People’s Republic of China. Negotiations and meetings with Chinese contractual partners also take up a lot of time although they are structured in a surprisingly modern and efficient manner: the objective is to make decisions fast. They think in the long term but wish to conclude short-term cooperations and contracts. All that remains is to wait and see whether additional wheelset deliveries will be ordered.
Thorsten Schürmann
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