Kolmeks Oy finds growth in the Chinese district heating market

ump manufacturer Kolmeks has found new growth in the Chinese district heating market and already employs around 420 people in China. Finnpartnership has provided valuable support for this new venture.

Janakkala-based Kolmeks Oy has manufactured machinery and equipment since 1937. The company specialises in centrifugal pumps, electric motors and frequency converters and today generates the majority of its sales in China. According to Kolmeks’s Chairman, Kent Björklund, the Finnish company was first encouraged to enter the Chinese market by its customers. These customers include global operators such as Kone and ABB. “We have been delivering pumps to China since the 1990s. And in 2003, we set up a local subsidiary, which began producing electric motor components,” says Björklund. Kolmeks’ largest production facility in China is located in Chuzhou, 250 miles west of Shanghai.

Shifting into growth gear in China

A few years ago Kolmeks decided to move up a gear in China. The company began investigating the possibility of replicating the Finnish pump business in the Chinese market. Björklund oversaw the operation locally to ensure the groundwork was thorough. “It was a long process. We began by looking at the Chinese market, whether European products would suit it and how they would have to be customised to meet local needs.”

According to Björklund, the first priority was to define Kolmeks’ competitive position. “There are 1,500 pump manufacturers in China, but the high-quality end of the market is dominated by 5 or 6 foreign companies. We had to position ourselves in this group from the outset.” Björklund believes that Chinese customers are extremely cost-conscious. That being said, Kolmeks competes on the quality of its products and services, not price. “Foreign companies must understand that their Chinese-made products must be at least as good as those made in the company’s country of origin.”

A boost from Finnpartnership

Kolmeks received business partnership support from Finnpartnership for the expansion planning process in China. The support was used to prepare a business plan and map the local market. “Thanks to Finnpartnership’s support, we were able to implement this operation on a much larger scale and much quicker. In addition, the presence of an external funding partner made the preparation process more robust, for example, by allowing us to carefully analyse the local market.”

The developmental impacts of the expansion were also taken into account. Following its research, the company decided to invest in the construction of a 160,000 ft² production and office complex in Chuzhou. The construction project adheres to the latest environmental and health and safety standards. “We also transferred the necessary business competence to China, which included the training of Chinese employees in the manufacture, maintenance and sales of our products.” Kolmeks currently employs approximately 420 people in its two production facilities and three sales offices in China. Björklund points out that a skilled and motivated workforce and the most modern equipment are essential assets for the company – wherever it operates. In addition to Finland and China, the company has operations in Estonia and recently opened an office in India.

China invests in district heating

According to Kent Björklund, district heating projects are some of the most promising growth areas in China. “China has the world’s largest district heating network, which will undergo modernisation requiring vast amounts of money in the next 20 years. It is the world’s fastest growing district heating market.” The Chinese district heating network is also rapidly expanding as a result of increased urbanisation. Thus, efforts are made to find solutions to improve energy-efficiency and reduce CO2 emissions for both new construction and modernisation projects. “Kolmeks products are perfectly aligned with these objectives. China is a market where we are looking to strongly position ourselves. Kolmeks has a bright future in the Chinese market,” Björklund says.

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