Seeking Alpha

Shell turning to Asian suppliers, underscoring threat to Caterpillar, Joy Global

  • Royal Dutch Shell (RDS.A, RDS.B) says it will use more Chinese equipment at its struggling U.S. shale business, becoming the latest natural resources company to try to reduce costs by switching to cheaper Asian suppliers.
  • Miners such as Rio Tinto (RIO) and Antofagasta (ANFGF) already are using more Chinese machinery, encouraged by improved reliability which they say can now be integrated into existing operations without compromising efficiency or safety standards.
  • Shell's shift to lower-cost Chinese manufacturers underscores the potential threat to western industrial equipment makers such as Caterpillar (CAT) and Joy Global (JOY) from their competitors in emerging markets.
Comments (5)
  • john001
    , contributor
    Comments (623) | Send Message
    Thinking of this move "penny wise and pound foolish"?
    1 Apr, 02:46 PM Reply Like
  • CornStove
    , contributor
    Comments (95) | Send Message
    so .... a lot of the US brand-name equipment is made in China anyway and a US label is put on it. I don't see much upside in Caterpillar or Joy. Emerging markets for heavy equipment could be going downward ...
    1 Apr, 03:41 PM Reply Like
  • joeduck
    , contributor
    Comments (16) | Send Message
    Having been in the heavy equipment business, I can tell you that many Asian manufacturers have made serious progress with both design and reliability. They simply copy the basic designs of American equipment and then out source components , many from American manufacturers such as engines from Cummings, pumps from Volvo or Hiatachi and presto a Cat clone . They also have very modern factories utilizing more robotics and less manpower. Robots also do not have unions .
    1 Apr, 09:49 PM Reply Like
  • anuragkakkar
    , contributor
    Comment (1) | Send Message
    Some brand are known in the market due to their quality. Using the cheap manpower or using the different tech to reduce the cost is acceptable but compromising with the quality will destroy the brand image and accordingly the market share as well…
    2 Apr, 01:26 AM Reply Like
  • CapGoodsAlpha
    , contributor
    Comments (42) | Send Message
    $CAT, $JOY, $ATCOB - No question Chinese companies can produce good quality machines for a lower upfront price. The COST will be a breakdown at a remote site that tests their supply chain. When Caterpillar bought Bucyrus they didn't just buy the product line - they also got a high quality service, aftermarket and supply chain infrastructure to support clients globally. If you look at Royal Dutch's performance in recent years you will note they are not considered one of the smarter oil companies and are under pressure from high cost, underperforming projects.
    2 Apr, 08:54 AM Reply Like
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