Birtley first Chinese investment in Kentucky

When Shandong Borun Process Industrial Technology Co acquired Birtley Industrial Equipment for $15 million in 2013, it marked a milestone: this was the first investment made in Kentucky by a Chinese company.

Founded in 1994, Borun is located in the high and new technology district of Zibo city, Shandong. Borun mainly focuses on the production, R&D and marketing of four series of products: wear protection products, coal-washing equipment, material handling systems and chemicals.

Its investment in Birtley in Kentucky was to produce coal-washing equipment. The decision was made at the height of US coal industry — the US ranked second only to China in coal production and consumption in the early 2010s.

Primarily used for power generation, the US national annual production of coal was at roughly 1 billion tons. Kentucky produced about a tenth of it and its demand for heavy duty coal equipment was high.

With the anticipation of selling coal-washing equipment to the coal industry, Birtley built a large capacity factory to produce the machines, said Zhao Caoxun, production technology and development manager at Birtley.

Whenis first mined, it contains a lot of impurities such as sulfur and stones. Coal-washing equipment, which includes cyclones, screens and centrifuges, helps remove those rejects.

However, soon after the investment was made, trends in the coal industry began to change. Shale gas technology emerged and gas production went through the roof. Natural gas, a cleaner energy, became abundant and affordable.

Meanwhile, the Obama administration was enforcing stricter environmental protection regulations.

"Under President Obama, the requirements for emission and waste water treatment became more stringent for the coal-related industry," said Zhao. "The permitting process took much longer, often more than a year. Coupled with cheaper gas, power generation through coal became unprofitable for many."

US coal production dropped more than 25 percent in the last a few years. Unable to sell as much as equipment as it originally envisioned in a shrinking market, Birtley took steps to adapt.

"We first turned to the parts and service business," Zhao said. "Mining companies are less likely to buy new equipment but they still need repairs and parts. We provide a parts supply as well as repair service. We also refurbish used equipment."

Birtley also functions as a procurement unit for its parent company Borun in China and exports millions of dollars of materials to China every year.

In addition, Birtley has begun to explore other business opportunities, and has succeeded in building projects related to environmental protection.

In Shandong, where Borun is located, the impact of industrial pollution is obvious and serious.

"The environmental industry is becoming a big deal in China, and Birtley has become a platform for Borun to bring advanced US environmental technology to China," Zhao said.

Working with academics from Georgia and Alabama, Birtley helped bring plasma gasification technology to China.

"Plasma gasification technology uses extreme high temperature to process harmful waste and turn it into syngas [synthesis gas] for power generation or into chemicals for other industrial uses," Zhao explained.

Working with experts in the US, Birtley and Borun brought this technology to China and built the first plasma gasification facility in Zibo for Shandong Xinquan Pharmaceutical Co to treat pharmaceutical wastewater.

Taking the lesson learned in Kentucky, Zhao said the first facility is not that big, with an investment of around $2 million only. Other similar plasma gasification projects are underway.

Birtley is also working with an Oklahoma company on another environment friendly project — using key US components to build a high-temperature furnace to incinerate hazardous industrial waste.

Besides adapting to a changing market, Zhao said that adaption to local culture has been another experience at Birtley.

Doing business in the more culturally homogenous state of Kentucky — compared to the west or east coasts where Chinese investment is more visible — Zhao said there has been a cultural learning curve.

"People here are very reliable, they do what's supposed to be done and always deliver. However, some of them don't like to venture outside. We had one worker who declined to go to China for job training because it's just too far away and too different," said Zhao.

Another major issue had been guns. Carrying a gun is common for a lot of people in Kentucky, and Zhao finds the presence of guns in the workplace a bit unsettling.

"Some said that they feel naked without guns with them. Eventually we had to compromise: they leave their guns behind in the car in the company parking lot," said Zhao.

Of the close to 20 employees at Birtley, the majority are local residents and only four staff members are ethnically Chinese. Communication styles are certainly different between the two groups, Zhao said. Americans are more direct while Chinese tend to be more subtle. The two groups have learned to appreciate the other's style and get the message across.

Zhao also emphasizes that quality of products and service is the most important factor for success in the US.

"Bad quality means downtime for the customers. Downtime means large amounts of revenue loss. Quality, not price, is the most important part of having a successful business," said Zhao.

mayzhou@chinadailyusa.com