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THE HOMELAND OF GIANTS

Окт 19, 2017
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BelAZ holding, leader in Belarusian and manufacturer of heavy-duty dump trucks, has reported success in the first six months of theyear: exports have doubled, the plant has orders till the end of the year, and work is already underway to put together a portfolio for 2018. What was it that allowed BelAZ to increase exports so dramatically? We discussed this topic and others with Konstantin Ryltsov, deputy director for marketing and export policy and director of BelAZ’s marketing center.
Q. Several years ago, reports said that the global crisis had made things considerably worse for BelAZ. However, at the moment there is very high demand for trucks manufactured by the factory. What is the reason for this?A. Demand for heavy-duty trucks has risen due to a rise in the prices of all raw materials. It has become profitable for the mining industry to invest in the development of new mineral deposits.
Another point is that deferred demand has worked. When prices of raw materials were low, quarry owners were reluctant to invest in development. However, over time their fleet of trucks became obsolete and worn out. Right now there are no dump trucks in the second-hand market. Therefore, all trucks now being sold are new vehicles manufactured by BelAZ and our competitors.

Q. Is it true that more than 96 percent of your output in 2016 was exported?
A. Yes, our quarry trucks were supplied to 27 countries. In the first six months of this year, BelAZ sold twice as much as in the same period last year.
Q. Countries that were part of the Soviet Union are BelAZ’s traditional market. Are you managing to find new customers?
A. We are a state-owned company, and the country’s leadership had tasked us with diversifying our sales markets. Previously, our sales to Russia accounted for 65-70 percent of output, but this year it’s down to 60 percent. Our objective for the near future is to bring it down to machine-building 50 percent. This does not mean that we are abandoning our traditional markets. However, against a backdrop of higher sales, our goal is to increase our presence in the markets of countries further afield.

Why else is diversification important? The economic crisis affected every country in a different way, and everyone is handling it in a different way. For example, Russia is currently recovering, but Australia is still ‘asleep.’ If we deal with market distribution correctly, a decline in one region can be compensated for by sales in another. For us as a manufacturer, this is a very important point.

Q. Where do you see growth opportunities for BelAZ?
A. We have great prospects in Africa. The volume of minerals they have allows the world’s largest mining companies to expand their operations widely on the continent. We are interested in the Asian market as well. We have already supplied 40 to Indonesia. This contract is noteworthy for the fact that we were in tough competition with Komatsu, which makes 90-ton vehicles there. They were counting on that contract. However, despite difficult weather and road conditions, our trucks proved to be better, demonstrating a high level of technology readiness. Other customers look at how our trucks function in these quarries and conclude that Belarusian vehicles are good. We have started receiving orders to supply another batch of vehicles to Indonesia.

Both North and South American markets have shown an interest in our dump trucks. We have registered a dealer and we participate in exhibitions. Previously, there was a dominance of Caterpillar and Komatsu, and nobody even wanted to talk to us. However, we are now in touch with the management of mining giants like Vale, BHP Billiton, and Anglo American. They are worried about whether we will be able to provide service since Belarus is so far away. To this, we respond that we were in exactly the same position when we began in Africa, and things are fine, everything works. There is one price threshold in Asia, and there is a different one, a more interesting one, in America.

Latin America is showing an intense interest in our largest truck, which has a payload capacity of 450 tons. A major tender is currently underway in Chile for the development of its largest copper mine, Escondida. Within the next five years, Chileans want to update their entire truck fleet, which now has 160 trucks with a payload capacity of 360 tons. They may buy about 100 vehicles with a capacity of 450 tons each. Certainly, no single manufacturer in the world could manage such volumes, and the customer understands this. Therefore, there are four participants in the bid. The Chileans plan to take test vehicles from each of them and, within a year or two, they will see which of them they are more comfortable with.

Q. People believe that nobody needs diversification of exports just for the sake of diversification. Logistics alone can eat all the profits earned from supplying distant markets. Is this not true in your case?
A. No, not at all. Let’s say a vehicle costs roughly 1.5 million dollars, and transporting it to Indonesia costs 40,000 dollars. You cannot compare the two figures. Logistics is, of course, an important component, but not a key one that would keep you from opening new markets. There are other considerations as well. When accessing new markets, we’re not talking “pure” sales. We have to provide test vehicles so that quarry owners try them out in the field, and only after this will they tell us if they want to buy them, lease them etc.
There is also the problem of reliable local partners. There have been cases when companies said they wanted to be our dealer, sold 10 trucks and then forgot about them. The trucks broke down, nobody repaired them, nobody informed us, but we are still dealing with the effects of these incidents ten years later.

Therefore, we are very cautious when selecting partners. We give them a key task – to establish maintenance service. We assist them by dispatching our people for six months or a year to train their personnel.
There is another interesting point. Previously, we were the ones to propose cooperation, but now it’s the other way around. All those presentations that we held earlier are bearing fruit. People in new markets are now aware of the BelAZ brand.
According to the Parker Bay agency, BelAZ is Number Two in sales of trucks with a payload capacity of 90 tons and higher. We have 33 percent of the world market, Komatsu has 38 percent. We have outstripped Caterpillar, which used to hold 40 percent of the market.
By the way, all companies in the world work towards diversification. Take Caterpillar, whose prices in America, where they have their head office and assembly lines, are much higher than in Russia. They are interested in the Russian market, so they dumptheir product.

Q. According to your competitors, one of the reasons for the success of Belarusian dump trucks is the possibility of getting preferential export loans and export risk insurance.

A. Yes, we use all possible instruments, as dotransnational corporations. Analogues of foreign institutions that support exporters operate in Belarus: Eximgarant of Belarus and Promagroleasing. Thanks to this, we can offer our buyers financing that is just as good as that offered by our competitors.

Q. BelAZ has a 100 percent subsidiary registered in Singapore – Finmining PTE. What role does it play?
A. It’s just a financial instrument. Due to a number of legal reasons, it was difficult for us to work with foreign buyers outside the CIS.

Q. Why Singapore?
A. It has the most favorable tax system. At first, we had thought about Switzerland but eventually settled on Singapore. When we were in the process of registering the company, local authorities did a very thorough background check on us as part of the fight against money-laundering, arms deliveries and so on. They do it to anyone who is registered in Singapore but does not actively do business there. In the first six months, things were very difficult, because Belarus was still under Western sanctions. However,we were able to convince Singapore’s supervisory authorities of the absolute transparency of our intentions. They do not have any problem with us now.

Q. How long does it take to make one BelAZ?
A. There is no one definitive answer. We exercise an individual approach to every customer. Whatever they order, we make. Compared to competitors, BelAZ has the widest range of quarry dump trucks – almost 60 models and modifications with a payload capacity from 30 to 450 tons. For every quarry, we offer exactly the kind of truck that will work well there.
Q. Say you and I have just made a deal. When will I receive my truck?
A. That depends on the payload capacity of the dump truck. You will receive a 30- ton «baby» within a month. However, if you order the best-selling 130-ton truck, where we have about 80 percent of the world market, you will have to wait. For complex modifications, the entire production cycle from the moment of placing an order to the moment of putting a truck into operation may take up to six months.
Q. Who supplies the tires for your dump trucks?
A. Most of them are from a Belarusian manufacturer – Belshina.
Q. Are you happy with the quality of these gigantic tires?
A. There is room for improvement. But again, everything is relative. For example, we supplied a batch of dump trucks with Belarusian tires to Vietnam. They malfunctionedafter two months. Then we supplied them with Bridgestone and Goodyear tires… They lasted longer. But when we began to calculate the cost of one kilometer of operation, Belshina’s tires were not the worst.

Q. And in conclusion – about your plans. Are there any grounds to say that the current positive sales dynamics will continue?
A. For the next 18 months, we forecast that the factory will operate to its full capacity. We look to the future with confidence, because we did not stop our modernization programs even during the crisis. We invested more than 300 million dollars in revamping production. Our sales and profits are growing, as are the wages of our employees. Currently, BelAZ operates in three shifts. We are hiring additional staff. People used to complain that there was no work, but now they ask us to give them a little rest.

Photos: BelAZ press service

By Aleksandr Zayats

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