TBY talks to L. Saeedi, Member of the Board and Managing Director at HEPCO Group, on the heavy machinery sector and regional export plans.
THE BUSINESS YEAR HEPCO represents the largest share of production, supply, and support for heavy machinery in Iran. What are some highlights from your experience in 2011 and how do they compare to overall trends in the industry?
L.SAEEDI In comparison to 2011, we are increasing and promoting our business in the local market and are looking for new activities, while diversifying our business at the international level. HEPCO mainly focuses on the mining sector, providing machinery to mining companies. The mining sector has flourished in recent years, and the demand for machinery is very high. HEPCO is also looking seriously at opportunities arising from public sector contracts, allowing us to get more involved in the provision of machinery for the mining industry. We have also been looking at the agriculture sector, providing heavy combine harvesters and tractors. In terms of its work with municipalities, HEPCO has provided machinery to specialized affiliated enterprises, such as waste management companies. We would also like to get more involved in the petroleum sector in order to increase our market share in the industry. Our approach is to develop subsidiaries to work under this group in various sectors, while the HEPCO plant will be specialized in producing machinery for road construction.
Which sectors is HEPCO most involved in?
We are most heavily involved in road construction, but in the future we will concentrate more on mining. Agriculture is also increasing in significance. We will certainly be cooperating with international brands on road construction machinery, but for mining operations we need more cooperation from our international partners. In terms of constructing subways for the municipalities, we have to be more involved with constructing tunnel-boring machines (TBMs), and from this year on, we are going to be working with our partners to build some parts for TBMs in Iran. We have to increase our international cooperation with non-Iranian companies that are involved in supplying and supporting machinery for mining and TBMs. In Iran, the construction of subways is on the rise. Projects to develop subway systems have already begun in Tabriz, Ahvaz, Mashhad, and Shiraz. In addition to providing excavating machinery, HEPCO will also be engaged in manufacturing parts for subway carriages. Different varieties of TBMs are used depending on soil type. We tailor-build machinery depending on the unique conditions of each city. From now on, we are also going to specialize more and more on the design and construction of subway carriages.
Why did you decide to specialize in this niche sector?
We already have the necessary capacity to produce passenger carriages. HEPCO’s main shareholder is Kowsar Wagon Construction Company, and we can tackle such projects together.
What steps need to be taken by the government and the private sector to develop the local mining industry?
The most critical element is to support exploration. The development of the mining industry depends on the exploration data available. Iran has a Five-Year Development Plan (FYDP), and in the near future the excavation ratio should be doubled. The FYDP outlines increased levels of investment in aluminum, copper, and iron ore. According to the FYDP, HEPCO will provide $800 million worth of machinery for this industry, which in our view is the most important element of the plan. We are interested in providing this kind of machinery, and the government is solidly supporting the private sector to be able to achieve the stated targets.
What does HEPCO bring to the mining industry in terms of value-added compared to its competitors?
HEPCO provides machinery to companies in order to begin excavation activities. We provide machinery for the mining of natural stone for residential use. Usually, around 30% to 40% of the stone mined is good to use, while the rest is rubble. However, we have introduced machinery that increase the usability ratio to 70% or 80%. In the past, miners used heavy loaders. Now, HEPCO has introduced more modern machinery and equipment that not only increases productivity, but also promotes value-added. Our backhoe loaders also cost one-third that of the normal heavy-duty loaders in the market. This equipment can be used in both iron ore and copper mines, reducing costs and upping productivity. With our new range of excavators and loaders, we are also looking to further decrease costs.
What is your outlook for 2013 and what are your expectations for the export market?
We are optimistic. In terms of exports, the government is working to promote trade links for machinery sales. We hope that this, in turn, will improve our access to the parts that we need to import from abroad. The HEPCO team has continued to develop the firm’s capacity to export machinery to neighboring countries in the CIS region and also Iraq. We are currently working on an export development plan and, since the automotive industry in Iraq is flourishing, you will see a lot of Iranian cars and machinery in Iraq. We work to cater to the needs of contractors in foreign markets.
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© The Business Year - July 2012