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Project part-financed by the European Union
With the long-term decline of the UK coal industry, overseas markets have become increasingly important to the business’ survival. Currently the UK extracts around 20 million tons of coal per year. In China, the market is one hundred times larger, at two billion tons. The country is an obvious target for Hydra Mining and the company recently applied to the Export Marketing Research Scheme for support in researching China’s market potential.
Chief Executive, Gordon McShannon, explains: “We had used the Scheme with great success to research India. China was even more daunting and difficult so we knew it was vital to gain a thorough understanding of the marketplace. Without the Export Marketing Research Scheme, we would still be talking about conducting market research in China. One of the benefits of the scheme is that it gives you the support and incentive to do it now. Our Indian experience taught us a lot and we were able to tap into a considerable amount of specialist knowledge and expertise, as well as using all of the contacts that we had at our disposal.”
The research revealed a vast potential marketplace with wide geographical spread across the whole of China. One of the most surprising discoveries was how far China lags behind the Western world in terms of the technology of its coal cutting systems. “The vast majority of shearer drums used in China use old technology and designs that were in use in the UK 20 years ago. Whereas more mature markets tend to opt for costlier products that have increased productivity capability with improved health and safety features, in China cheapness is still the main driving factor. In order for us to succeed long term in this market, we realise we will have to encourage the industry to embrace new technology for the sake of greater safety and improved performance.”
Hydra Mining has acted decisively on its findings. The company recognised that, in order to penetrate the market, it needed to team up with a Chinese manufacturer of shearers, the specialist machinery used to carve out huge blocks of coal underground. Hydra Mining designs and manufactures the drums that are attached to these shearers. These drums need to be replaced on a regular basis as they wear out and rapid delivery is essential. In addition, engineers need to be on hand to refurbish worn out parts. It is simply not possible to provide this level of service from the UK.
By teaming up with a Chinese OEM, Hydra Mining can supply the expertise and raw materials needed to produce the drums, while the actual manufacturing process takes place in China. Chinese customers respond favourably to this mix of British technology and Chinese manufacturing and, to date, sales of components to China have reached £¼m.
Hydra Mining is realistic about the future: “We need to continue to research the market to see how we can forge relationships with other Chinese manufacturers. However, in the first instance we are content to go slowly to ensure we get things right. We have been particularly careful to research and respect any differences in business culture, such as the Chinese practice of taking a nap after lunch. Customers are appreciative that you have taken the time to find out about these things and you are happy to accommodate them.
“In the long term, we hope to establish our own operation out in China. However, our first priority is to establish a good reputation there and to generate demand for some of our more high-tech and, therefore, profitable products. The Export Marketing Research Scheme has been an invaluable support along the way.
