Amid post-economic crisis rising demands for steel plant modernisation and optimisation, Siemens VAI chief executive officer Werner Auer said saving investments by adopting cheap technologies would be a 'big mistake' for firms with a long-term vision. He tells Thu Tra why.
At the 5th Media Summit on Metals and Mining Technologies in Kolkata, India on May 11, you announced that this year Siemens VAI was focusing on expanding its business in BRIC countries (Brazil, Russia, India and China), as well as the Middle East. So what about Vietnam and some South East Asian countries you put an emphasis on a year ago?
India is our focus and so is China. We have continued to expand our presence in China and India by building up local engineering and production capacities. In India, we are concentrating on developing and producing new components for steel production, whereas in China the focus is on products for the casting segment.
Brazil is a very specific market where we have successful setups with certain competencies. Meanwhile, Russia again is a completely different market, which took something to get through the economic crisis and is coming back, and we have a very specific field in which we have already invested in this country.
I do believe Vietnam and Indonesia as well as some other markets [great demands] will come sooner or later, depending on the economic development in these countries. In Vietnam you have more than 85 million people, and sooner or later Indonesia will have 300 million. So when you go to average steel consumption per capita you know sooner or later it will happen. Thus we are following Vietnam very carefully.
At the moment there are some big projects in Vietnam such as the huge investment by Taiwan’s Formosa group in Ha Tinh province. The group wants to realise a 20-million-tonnes plant in phases, which is very important for Vietnam, creating new possibilities and opportunities for the downstream industries.
How different are your approaches to larger markets like China and India and to smaller ones like Vietnam?
We are used to following countries in different ways. For big markets like India and China, we have huge setups to execute projects. Vietnam will be a bit different because at the moment you are carrying out big projects, including Formosa’s as I said earlier. We are negotiating with it and we have to think about what we have to do in Vietnam. We can be in for a different package and we will have to set a strategy on how to execute these projects. Again I assume Vietnam is very special and we are about to set up in Vietnam so that we can fulfill the task of project execution.
Despite your expectation of stronger demand for modernisation and services to further optimise operation procedures and individual processes in the steel plants following the economic crisis, you just also noted at the 5th Media Summit the copy of technologies is a considerable challenge. You have also said since one year ago that Siemens VAI is developing low-cost genuine technologies in response to the competition from copycats and cheap technology providers. What are the developments so far?
We have shifted some product portfolios to China and India and they are now competing with the local suppliers in their markets. These are very big and interesting markets for plants with less requirements. We have moved our competencies to China and India and let them define the requirements for products in their markets. They have been very successful in competing with Chinese and India suppliers.
Can steel plants in other countries approach such downsized technologies to save costs?
Yes, because these are global-scale operations, the technologies can be customised country-by-country to fit in local demands.
Obviously using the best technologies helps investors enhance product quality, save energy consumption and even make much money through selling the certified emission reduction credits thanks to the less greenhouse gas emissions. Yet are such returns convincing enough given the relatively high costs of the best technologies?
I would say in the long run, yes, because we cannot expect energy prices to substantially go down. I do believe energy prices are creeping up steadily. Using not the best technologies means you spend too much every year on energy compared to others and your productivity compared to the best ones is less. Energy consumption is at high levels, so expecting the plant to be running in 40-50 years compensates for the higher prices of technologies.
I know that from negotiations customers’ emphasis is always on the lower prices compared to other ones. If you really compare the total cost of ownership then the best technologies pay for it all the same. The question is how long you look into the future, five, 10 or 15 years. Normally at this time people consider 10 years and then go to cheap technologies. But for such big projects as the Ha Tinh-based one, which is implemented in phases, not going for the best technologies will be a big mistake.