Recognised as the largest ASU manufacturer in China, Hangzhou Hangyang talks to gasworld about growth drivers, gas supply and its vision for the future.

With a history of 60 years by 2010, Hangzhou Hangyang enjoys a strong reputation within the Chinese industrial gas business.

The company has already manufactured more than 3000 sets of air separation equipment, and its equipment is installed in more than 30 countries around the world.

With the competition from both overseas and local companies, Hangyang is still marching on towards its goal of becoming a Tier 1 international air separation equipment manufacturer.

Having actually started as a general machinery manufacturer and a maintenance workshop in 1950, the company’s original name was Zhejiang Iron Factory and its first set of oxygen generating equipment was successfully commissioned in 1956.

Since then, Hangyang has continued to focus on the oxygen plants business and has now become the leading enterprise in this industry in China.

Essentially a state-owned enterprise with more than 98% asset in the hands of Hangyang Group and China Huarong Asset Management Corporation, Hangyang harbours plans to be listed on the stock market in China.

The company also has plans to complement its ASU manufacturing business and step into the gas supply business, a visionary move which affords greater stability and in turn, encourages even further development of its ASU technology.

Keen to discuss these plans and much more, gasworld recently took some time out in Hangzhou, China to interview General Manager Mr Shao Rong MAO.

The company
gasworld asks: Where is the company based and where are the company headquarters?

MAO replies: At the moment, the company is based here in Hangzhou together with the headquarters. When the construction of the new manufacturing base in Lin’an is complete, the manufacturing department will be relocated to Lin’an, near Hangzhou, while the management, sales, and technical and development team will stay in Hangzhou.

GW: Could you reveal the company’s performance in 2008?

MAO: Last year the total sales revenue was RMB 3bn (US$0.43bn approx.) and the profit after tax was RMB 250m out of a gross profit of RMB 300m.

Business activity and vision
GW: The company is well known as the largest ASU manufacturer in China – is Hangyang involved in any other areas of the gases business, such as gas supply or other equipment production?

MAO: Yes, we do have investments in the gas supply business and it is designated as a special and separate topic. In 2008, our gas sales had reached RMB 100m and we also have several projects ongoing. We are building two ASUs. Our next step is to penetrate into the gas supply business in a faster pace.

Regarding other equipment manufacturing, besides the packaged air separation plants, we also manufacture individual machinery and units for sale, for example the compressors and the turbines.

They are mainly related to the cryogenic industry, such as cold boxes for ethylene, liquefaction of natural gas. We will have three furnaces for making plate-fin type heat exchangers after the relocation.

The reason why we started to invest in the gas supply business is that we have seen how many large enterprises and those only manufacturing ASUs will not be large. We also feel that the equipment business is not such a stable business, while a gas supply business can generate stable income.

Moreover, getting involved in the gas supply business can help the development of our ASU technology.

If we are in the gas business, we can invest in new technology. Moreover, we also have customers that have asked Hangyang to supply gas.

GW: How do you find the differences between the equipment business and the gas business?

MAO: There are some common points and also differences. The gas business will rely on the ASUs and Hangyang has extensive experience in that area. In terms of differences, the business modes of these two businesses are completely different.

The gas business is a capital intensive business and a long term gas supply business, and we need a long term and stable operation. Often it involves the operation of several units and in several locations – we can make use of our expertise in technology to invest in a new series of equipment for the gases business.

GW: In terms of project value, how much of the company’s business is domestic (within China) and how much is export-based?

MAO: There is no fixed percentage each year, it all depends on the orders. Last year one-third of the business was for export. Hangyang is not yet an international company, although we want to be one.

For export business, we usually rely on working partners and only a small portion of export business is made by ourselves.

Cooperation and experiences
GW: How is the cooperation with Messer at the moment? What more achievements would you like to see in the future?

MAO: The cooperation with Messer will see their investment in the future use our cold boxes. It’s a mutual benefit to both of us – using our cold boxes the Messer Group will have good competitiveness in the gas business, and we will generate good business as a result.

Messer does have a good position in the gas business and we hope that other parties will also buy our equipment. We have established a joint venture company in Frankfurt am Main in Germany too, which will provide service and support to our European customers.

GW: Hangyang has enjoyed cooperation with some of the major gas equipment manufacturers before. Tell us about the experience that you have gained with each partner...

MAO: We have had cooperation with Linde and Air Liquide before, in the manufacturing of air separation units. The cooperation with Linde was from 1978 to 1988.

It was organised by China National Technical IMP. & EXP. Corp. The cooperation with Air Liquide meanwhile, was from 1994 to around 2008 and now Hangyang has completely withdrawn from this joint venture.

The experiences with these two companies are very different. With Linde, we had the agreement that China National Technical IMP. & EXP. Corp. had bought the technology of Linde, and our people were trained from design to manufacturing.

With Air Liquide however, it was mostly a commercial cooperation. Although not much technology content had been transferred, we still had some cooperation from a technology perspective.

Overall, through these cooperations we learn more about the technology in other parts of the world, as well as the mode and the business. Now, Hangyang is developing its own technology and the experience of working with these companies has helped us one way or another.

Now and next
GW: What are the business trends in the Chinese market? For example, is packaged gases a strong sector, or are onsite facilities the more dominant business type in the country?

MAO: At the moment, only our Hubei plant has liquid sales, while we do also have cylinder business. We are experimenting in all areas of the gas business – we look forward to setting up on-site plants and a large scale pipe network supply business in the future.

GW: What projects does Hangyang have underway at the moment?

MAO: We still have projects worth about RMB 1bn in construction in our manufacturing plants, including one 47000m3/h plant to be shipped to Moscow and other plants to be shipped to Germany and Switzerland, which will be put on delivery this year.

GW: What’s driving growth for Hangyang at present and in the future? Which areas or applications are the growth drivers?

MAO: Demand in the steel industry is great and we foresee that there will be some restructuring and modifications in technology, which will bring more opportunities.

Coal chemistry is another industry that will require large scale ASU activity, while the gas consumption is enormous and there are many such projects in China.

According to information provided by Mr MAO, Hangyang has now established four gas companies in Zhejiang, Hubei, Jilin and Henan. MAO explained that the total capacity is still small compared with other gas companies, although they have another 25000m3/h ASUs under construction.

GW: We heard that Hangyang is moving site. Why the new facility, and what will the capacity of the new site be?

MAO: When the new site is complete and the moving is finished, our manufacturing capability will have a big lift.

We will be able to manufacture air separation plants of a total capacity of one million cubic metres per hour and around 50 sets per year. The site is more than 600000m2, compared with about 447000m2 at present.

We expect the whole move will be complete by the end of June this year. At the new site, the conditions for land transport will be much better because the existing site has constraints due to urban traffic. The new site will also have a river for marine traffic, which facilitates the delivery of equipment to the customers.

GW: What area(s) is the company focusing on at present and in the future?

MAO: Our main efforts are still with the engineering projects and the installations. We want to maintain our quality as the best in China and to build better plants to satisfy the requirements of international markets.

Hangyang has to improve its competitiveness. We want to focus on our business and not compare ourselves with other companies in other countries. We also want to provide better service and put more efforts into expanding our gases business.

As mentioned above, we are looking for more business for other equipment businesses, such as cold boxes for ethylene plants.