China underpins Norrhydro’s growth strategy

Norrhydro’s roots are in Rovaniemi, Lapland but it now has production in China, too. The factory in Changzhou, financed by Finnfund, is an important part of the growth strategy of this Finnish cylinder manufacturer.

Established in 1985, Norrhydro has come to concentrate on producing cylinders for hydraulic equipment used in forest machines, ships, ports and mines. Its main markets are in Finland and northern Europe but a few years ago it embarked on a plan to grow in the Far East. The Chinese market for hydraulic solutions has grown at an annual rate of 20-40 per cent since 2000. It is expected to grow even faster in the years ahead.

Norrhydro expanded operations into China and began operations in Changzhou in early 2012. Its factory is expected to be in full-scale operation in 2014 and will then employ 250.

Companies planning to set up in China should reserve plenty of time to get established. It is also important to build networks and develop personal relationships with customers and local officials.

China the best option

It was essential to expand operations into China. The growing markets for hydraulics are in Asia.

Production is not being shifted from Finland to China. The factory in Changzhou will make products for the Asian market while output from Finland goes to Europe.

It is difficult to serve customers operating in Asia from Rovaniemi when it takes eight weeks to ship products to the Far East.

Growth is an important part of Norrhydro’s strategy, but product development has a key role, too. In partnership with Tampere University and others, it is developing an intelligent management system that will increase the effectiveness of hydraulic systems while reducing their energy demands and emissions. By applying digital technology to hydraulics power demands can be cut down by up to 80 per cent.

Project finance from Finnfund

The Norrhydro project is a good example of how Finnfund supports the efforts of Finnish SMEs to build up a presence in developing countries. Finnfund is still needed in more developed target countries like China.

The main development impacts of the project are in knowledge transfer and job creation in China.

Beginning local production is important for Norrhydro’s future, too. It will be valuable, for example, when the company has developed smart, energy-saving hydraulic equipment and brings it to markets in Asia.

Support from Finnpartnership

When seeking partners for business operations in China, studying the project feasibility, drawing up a business plan, assessing environmental and social impacts, and training employees, Norrhydro received business partnership support from Finnpartnership.

In addition to its developmental impact in China, Norrhydro’s investment will also have favourable consequences at home.

A successful presence in a developing market can reinforce a company’s operations in Finland, too. In the best scenario, Asia will bring volume and leverage, helping to make it profitable to develop an energy-saving product in Finland.