WITH 10 fund managers, traders and analysts, I flew to the prosperous Jiangsu province last week to visit two petrochemical-related plays – Sunpower and Hengyang.
On board, I mulled over comments on trade recovery that is driven by petrochemicals and commodities exports to China and India, made by senior trade finance bankers who were quoted by the Business Times.
We were headed to Nanjiing, the capital (strictly a sub-provincial city) of one of China’s most prosperous provinces, and it is a highly intelligent city.
It has the third largest national library (Nanjing Library) after the National Library in Beijing and the Shanghai Library.
The city was also ranked 4th by Forbes magazine in its listing of "2008 Top 100 Business Cities in Mainland China", and is No.2 in sustainable development potential, according to the National Statistics Bureau’s evaluation of Chinese cities.
Historically, it has been a national hub of education, research, transportation and tourism. With an urban population of about 6 million, it is now the second largest commercial center in east China, after Shanghai.
So what types of enterprise does such a city spawn?
Take Sunpower. It is into cutting-edge work, as any casual visitor to the company would conclude after noting a wall covered with well over a hundred framed awards, certificates and patent registrations the company had won.
These include an Association of Quality Supervision, Inspection & Quarantine “China Top Brand” award, and filing 54 patents on heat transfer technologies to-date.
Sunpower's founder and executive chairman, Prof Guo Hongxin, is a scientist and was formerly a vice dean at Nanjing University of Technology’s Heat Pipe Technology Development Institute, which regularly hosts exchange students from international varsities seeking to learn the latest in this field.
Sunpower's executive director, Mr Frank Ma, is a Jiangsu native who speaks near impeccable English.
Sunpower is a leading supplier of equipment and systems that save energy and protect the environment for heavy industries, such as petrochemicals, and 73% of its FY08 revenue came from this sector.
Its customers are mainly large Chinese petrochemicals like Sinopec, CNPC Shenhua, Petrochina, CNOOC, China Railway Group.
It, however, has a strategy of diversifying its customer base into other sectors, such as electrical power generation and steel milling, as well as procuring more foreign customers.
Thanks to Sunpower's price competitiveness and extensive conformance to codes required by the numerous relevant international authorities, its foreign customers now include global bigwigs like Du Pont, Samsung, BASF, General Electric, Dow, BP, Unocal, Technip, Maison Worley Parsons.
55% of its revenues come from making pressure vessels, which holds fluid content under pressure.
In addition to pressure vessels made of copper and copper alloy, it also makes a very high-end type of vessels using special non-ferrous metals such as titanium and titanium alloy.
The costly material is used for vessels that need to withstand the harsh physical operating environment of chemical, petrochemical, electric power generation and pharmaceutical businesses.
Another 38% come from heat-pipe exchangers, which are thermal transfer devices used in areas where heat is required to be transmitted immediately and effectively, with no heat loss.
At Sunpower’s Nanjing HQ, we saw a demo of the heat transfer properties of the company’s special alloy heat pipe, in comparison to a copper pipe of the same mass.
After a few seconds in a glass of steaming hot water, Sunpower's special alloy pipe became scalding hot. However, the copper pipe could still be picked up with one’s fingers.
”Our heat pipes can transfer heat 3,000 times faster,” said Mr Ma.
After both pipes were moved to a glass of cold water, it was the special-alloy pipe that felt cold to the touch very quickly.
On 29 Sep, Sunpower announced a deal to supply two special materials oxidation reactors for Rmb 18.5 million, to be delivered in 2H10 to Zhejiang Yisheng.
These reactors, which will come in the form of the pressure vessel, will be made of titanium and possess highly corrosion-resistant qualities.
Such product specifications are important in the manufacturing of high-end equipment in the pressure vessel industry.
There are only about 10 to 20 players in China which are licensed to manufacture pressure vessels using these special alloys, and Sunpower is one of the few, according to Mr Ma.
The customer is part of a large petrochemical group specializing in the production of pure terephthalic acid (PTA) products, and Sunpower’s equipment is part of Zhejiang Yisheng’s Rmb 10 billion plan to be the world’s leading PTA producer by this year-end.
PTA is used mainly to make polyester PET, used by synthetic textile players such as SGX-listed Gaoxian Fibre and Fabric.
Including the latest order, Sunpower’s current order-book is Rmb 861 million, and more than half is expected be delivered in 2H09.
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