The hottest overseas resource giants face difficul

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Overseas resource giants face difficulties in cutting costs and competing to buy more Chinese equipment

overseas resource giants face difficulties in cutting costs and competing to buy more Chinese equipment

April 3, 2014

[China paint information] according to the financial times, the international oil giant Royal Dutch Shell recently said that it would use more shale mining equipment made in China, To cope with the fierce competition in the current global market. Analysts pointed out that the low cost of using Chinese mining equipment suppliers has become the most important reason for Shell's "shift". Since this year, shell has repeatedly said that it hopes to continue to cut costs and improve production efficiency

before shell, many resource giants had tasted the "sweetness" and began to use more high-quality and relatively low-cost mining equipment or machinery made in China. With shell joining, this camp is expected to continue to prosper

shell purchases more Chinese equipment

shell said it would use more Chinese made equipment in its unprofitable U.S. shale business unit. The company has thus become the latest natural resource enterprise trying to reduce costs by switching to cheaper equipment from Chinese suppliers. Insiders pointed out that in recent years, many oil and mining companies have significantly increased their capital expenditure during the commodity boom, but now they are under pressure from shareholders to reduce their expenditure and improve their return. Shell is also a little helpless to take this action. Ben van beurden, CEO of shell, said that the company was purchasing more equipment for its loss making North American business unit last year from countries with relatively low costs such as China, which could save up to 40% of the cost

previously, mining giants such as Rio Tinto and Antofagasta in Chile have begun to purchase Chinese equipment on a large scale. They believe that at present, Chinese equipment can be introduced into existing operations without affecting efficiency or safety standards

Antofagasta is a FTSE 100 constituent stock, and the mining company is now using more Chinese equipment to cut project costs. Diego Hern á ndez, CEO of the company, said that the quality of Chinese equipment is increasingly comparable to that of western manufacturers. "Nowadays, China's power shovel equipment can compete with Western power shovels under the same conditions."

Rio Tinto, another mining giant, has also spent heavily in China recently. The company is committed to reducing capital expenditure due to high MEG inventory in the Chinese market after investors were disappointed by cost overruns. It said that it purchased nearly $2billion of equipment in China last year and about $1billion of equipment in India. Sam Walsh, CEO of Rio Tinto, said at the end of last year that the company had purchased thousands of Chinese ore trucks and Chinese made loaders, stackers, reclaimers and trucks for its iron ore business. He said that the purchase cost savings brought by this move are very significant, and all equipment has passed Rio Tinto's very rigorous testing and definition

there are many difficulties in cutting costs

van burden said that the change to buy more Chinese equipment is also part of shell's "project mosaic", which aims to use more standardized and modular equipment and eliminate most customized equipment to reduce the cost of its U.S. business

van burden, who became the CEO of shell on January 1, has repeatedly said that reversing the decline of the company's North American shale business is one of the biggest challenges he faces. The company has about $24billion in shale assets in the United States and Canada, but has not yet made much profit from it. The data even showed that its upstream America Department suffered losses last year. Shell has announced the sale of some shale assets and recorded a US $2.1 billion impairment on its US shale business last year

however, insiders pointed out that although shell has made many efforts, the task of reducing the cost of shale business in the United States is still very arduous. With the increasing impact of LFG on the energy industry, while reducing costs, it should also improve production efficiency. In addition, it is also emphasized that as the world's largest oil company, shell's shift to lower cost Chinese manufacturers also highlights the potential threat posed by emerging market equipment suppliers to western traditional industrial equipment enterprises, such as Caterpillar and joy global, which are also under pressure to reduce prices. Once the price war starts, it remains to be seen whether emerging market enterprises can continue to attract resource giants

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