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China Embraces the World Market

Address by Lyle Bruce

29 November 2002

When Michael Growder (from the Department of Foreign Affairs and Trade) asked if MIM would participate in the report on China, and then in this launch, I was very pleased to accept. MIM has a good news story on successful export of technology to China which we are proud of and I am glad to have an audience to share our experiences with.

But first an introduction. I am Lyle Bruce, General Manager of MIM's Metallurgical Development group which amongst other work, markets key MIM technologies to the international mining and processing industries, including China. Today I will talk about the sale and application of MIM's technologies in China, particularly our smelting technology for production of copper and lead – ISASMELT.

MIM is a medium sized mining and metals company based in Queensland, but also with international operations. MIM started at Mount Isa, which is one of the world's great mineral deposits. Mount Isa is still very important, but MIM is now much more than Mount Isa. We produce coal, copper, lead, silver and gold, with operations in Australia, Argentina and the United Kingdom.

Over the years MIM has developed and applied several revolutionary technologies for mineral processing and metal production. We have a history of being innovative, and better still, capturing innovation, applying it, and then commercialising. Marketing of the technologies developed within the company is one of MIM's business activities.

An example is the IsaProcess which was invented at MIM's copper refinery in Townsville. This process is now used in the production of about 35% of the world's copper and is recognised as the best technology for copper refining.

ISASMELT is another example, and is the subject of most of our work in China. ISASMELT is a simple, highly efficient smelting process that MIM has developed to the point of being the lowest cost smelter of copper in the world. MIM makes this technology available to other companies through our technology marketing, and there are now eight operating ISASMELT plants around the world and two under construction. Current annual production through ISASMELT plants is approximately one million tonnes of copper metal and 80,000 tonnes of lead.

MIM's development and application of process technologies is disproportionate to the size of the company. We have a significant impact on the world's mineral processing industry for what is by world standards a small company.

Back to China – MIM has been active with its technologies in China for about five years. This has resulted in the completion of one contract for a copper smelter for Yunnan Copper (YCC) which started this year and is operating extremely well. A second contract is now in place for a new lead ISASMELT for Yunnan Metallurgical Group. This smelter is currently being designed. We have also sold IsaProcess copper refining technology for a plant in China.

I am often asked why we market technology, particularly to China. We are essentially a mining and processing company, so why do we allow others to use our technologies, and why do we help Chinese companies to be competitive? The answer is quite simple. The Chinese metallurgical industry is growing rapidly, as is demand for metals. We cannot stop this growth and the emergence of China as a major economic power, so it is better for us to be involved in the industry than to ignore it. China is not going to go away, so we are learning how to do business there and building a reputation that will help us in the future.

The marketing and application of our technologies is a deliberate strategy to maximise the benefit to MIM. The scope for applying major process technologies within MIM is limited. We already have a copper smelter and refinery.

To continue to evolve and improve our technologies, further applications are necessary. We can then bring the improvements from other sites back to our own operations. Every project that we undertake includes improvement. Our ideas are combined with those from our customers to continue to improve the technologies. Wider application of the technologies increases the base of skills and experience, and these experiences are shared amongst the family of technology licensees.

So again, why China? The Chinese metallurgical industry needs modernisation and consolidation. I have some example photos of a lead smelting plant in China. As you can see, the pollution is dreadful. The Chinese government has publicly committed to cleaning up the lead industry and reducing pollution from smelting. There is now strong pressure to implement technologies that allow clean and efficient industry. China is willing to pay for such technologies as it moves towards more sustainable development.

This photo shows the level of technology in some operations. This is a sinter pot lined with straw and coal which is then burnt to sinter the concentrate. This is extremely old technology, very inefficient and dirty. Replacement with a clean, efficient, automatic process is very attractive.

So there is a market and a supportive government. But how do we go about doing business in China? One consistent message that everyone working in China gives is do not rush. The market is large and changing, but do not expect quick profits. Profitable business is there to be had, but only through hard work, a lot of time and investment, both financial and in relationship building.

Step one – do not be over arrogant. Just because the benefits that we can bring may be obvious to us or others familiar with the technology does not mean that the Chinese customer will take the same view. There is an important education process to work through.

Many different stakeholders need to understand the technology and its benefits. These include government (possibly central, provincial and local), executive management of the client company, their metallurgical, engineering and operational management, the engineering companies, and the client company's peers and colleagues. No general manager or CEO is going to sign a contract to implement a technology that their colleagues have not heard of.

One method that we have used successfully to educate the industry in China is seminars. Arranged through government bodies to give them status, but with industry invited, we give seminars on smelting technology. The response to these seminars has been very positive.

Following the education process comes relationship building with a potential customer. The value of this should not be underestimated. In China it is important to first be friends, and then do business. An expression we have come across is “feeling investment”. It is worth making significant investment in building relationships. In our experience, the Chinese must feel comfortable with the people they are working with. They are looking for a long term, trusting relationship for mutual benefit. There tends to be a longer term view placed on a business deal than is common in western business. Each deal is a pre-curser to further work.

Relationship building often takes the form of entertainment – the Chinese banquet. But the little things are also very important. Making the effort to meet guests at the airport and escort them to their hotel, organising sight seeing, picking them up for meetings or site visits, thoughtful gifts, meeting senior people and formal speeches acknowledging our new friends make a significant impact. This could all be called politeness, but tends to be lacking, and not expected in dealing with western companies.

Another significant factor in developing a relationship is to show a willingness to attempt Chinese culture. Learn a few words of Chinese, use chopsticks, try unusual Chinese food. This will all earn respect.

Government support also plays an important role. For example, meeting a government minister while visiting MIM in Brisbane makes a lasting impression on an important delegation and adds a lot of credence to our proposal. Government backing is very significant in China. The Queensland Department of State Development has been very supportive of our activities in China.

But of course no deal can be done on relationship alone. We have to also be able to provide real value to the customer. For us, the best way of showing this is to have them visit and take them to our operations. For many it may be the first visit to Australia, and maybe the first time out of China. Mount Isa will almost certainly be their first experience of outback Australia. On these visits we work hard, but also ensure that the visitors experience Australia. We want them to remember their visit to MIM.

Negotiation is very important. Negotiation obviously occurs informally throughout the relationship building process, but at some stage, a formal negotiation will occur. The Chinese are good negotiators and will carefully plan the negotiation. Have an agenda, and prepare the negotiation plan. It helps to control the process and allow plenty of time to go through even minor issues. All issues of concern should be raised. If surety of payment is not clear, raise the issue and propose terms that are acceptable, or a letter of credit or bank guarantee. The commercial terms should be clear from the beginning. Do not make assumptions, or state “standard terms”, or be embarrassed about raising the issue. Agreeing commercial terms and ensuring payment will set a framework for future respect.

Ceremonies are important. A signing ceremony and a dinner celebrate an accomplishment and obtain formal commitment. This can be a major contract signing, or signing the minutes of a meeting. It is all part of the relationship process and recognition of milestones. It is a loss of face to not have an outcome after investing time.

Language is a barrier. A skilled interpreter is invaluable in doing business in China. Once a contract is signed and a project starts, the customer will probably provide interpreters. However, for relationship building and negotiation, having a Chinese speaker in your team is valuable.

Intellectual property is a common area of concern when working in China. Certainly copying does occur. Latest release DVDs for $2 or $3 are unlikely to be legitimate. However, there are promising signs of protection of IP. There is a well established internal system of patents in China, and the Chinese government and the courts are demonstrating a willingness to protect foreign IP. However, the best protection is to show the customer the value that they can obtain by continuing to work with you rather than trying to copy, or to allow others to copy. Supply of knowledge is obviously easier to protect and value than equipment or consumer items.

Overall our experiences in doing business in China have been positive. Our customers have been professional and honourable. All payments have been made, and long term relationships are in place. In fact, for the YCC copper smelter, we received an Acceptance Certificate earlier than required by the contract, and without performance of the Acceptance Test. This reflects both the success of the project, and also the trust built up over the last five years.

Once a deal is done and a contract signed, there is a definite feeling of cooperation and friendship with both parties working for a common outcome.

This is a good news story. Australian technology is being successfully exported to China, with happy customers and successful projects. It demonstrates that opportunities are available to those companies willing to make the effort and investment in working in China.


This page last modified: Tuesday, 10 December 2002 02:28:49 PM

Local Date: Thursday, 17 April 2014 07:44:22 PM