Locomotive maker secures $500m in new orders so far this year

ZHUZHOU, Hunan province - While extending its railway network throughout the country, China is also sending its trains across borders.

CSR Zhuzhou Electric Locomotive Co, a subsidy of China South Locomotive and Rolling Stock Corp (CSR), the largest listed railway equipment maker in China, is manufacturing locomotives for countries including Kazakhstan, Uzbekistan, Singapore and Turkey.

The locomotive maker has secured $500 million of new orders so far this year and is discussing further deals with more than 30 countries and regions.

Xu Zongxiang, the company's president, said it will sign a contract worth at least $70 million this week with the Central Asian nation of Uzbekistan.

The Hunan-based company is now competing with global industry giants such as France's Alstom, Canada's Bombardier and Germany's Siemens for contracts in many nations and regions.

Parent company CSR said it is planning to expand its overseas business, aiming to boost revenue from exports to 20 percent of its total sales in three to five years from 5 percent in 2009.

The worlds' No 4 rail equipment maker secured $1.2 billion in overseas orders in 2009, up 60 percent year-on-year. Among the orders, value-added products include bullet trains and subways, accounting for 70 percent of the total, indicating the company's competitiveness in the world's high-end vehicle market.

The company is now in partnership with Germany's Siemens to participate in tendering for the delivery of rolling stock and signaling systems to the Haramain high-speed rail project in Saudi Arabia, a 444-kilometer inter-city line.

The company is likely to win the bid, according to a CSR official with knowledge of the matter.

"Bullet trains, rail transit and locomotives - the economic products - will be our main exports," said CSR spokeswoman Li Min.

CSR posted an 85 percent jump in first-quarter net profit to 355.9 million yuan ($52 million) on revenue of 12.4 billion yuan, up 69 percent year-on-year. Its revenue rose 30 percent to 45.6 billion yuan in 2009. The company vowed to double its revenue by 2012 to become the global industry leader.

"Chinese companies are changing the landscape of the global railway market because of the dimensions of their home market and because they are becoming involved in international tenders, which is a new development," Dominique Pouliquen, Asia-Pacific managing director for Alstom, said in an earlier interview with the Financial Times.

 
China is moving rapidly to connect almost all of its provincial and regional capitals with bullet trains and is opening 1,920 km of high-speed rail routes this year. By 2020, China hopes to have 48,000 km of high-speed track, as much as the rest of the world put together.

China's market for rail equipment, including trains, components, and signaling systems, is expected to quintuple from an average of $10 billion a year in the period between 2004 and 2008 to more than $50 billion a year between 2009 and 2013, according to estimates from McKinsey.

Analysts said the massive construction of high-speed rail lines in China, for which CSR is one of the two train providers, offered a very convincing and successful model for the company's overseas expansion.

At the same time, its major rival, China Northern Locomotive and Rolling Stock Industry Corp (CNR), another domestic high-speed train provider, is also spreading its wings overseas.

This year, CNR plans to double its overseas business from 5 to 10 percent of its total volume. Its most recent overseas orders were from Pakistan and Argentina, worth a total of 4.1 billion yuan.