Sourcing Stories: An Ping is a trip back in time and a vision of the future
Article on how China's small steel producers are moving the country forward.
By David Lindley
President, EXIM LLC
Checking my email early one morning, I see correspondence from a friend in Florida. He is building a new organic produce operation and needs literally several football size fields' worth of steel wire grid mesh to be laid out for planting season later this summer.He is making rows of miniature greenhouses, but on an industrial farming scale. He's contacted several places on his own here in China, but he's not getting anywhere fast enough because it all has to be delivered by July. We talk for a while and make a plan to get his factories to finish their quotes and ramp up their production. Then it's time for me to take to the road.
Situated three hours drive south east of Beijing, on the coast of Hebei province, sits An Ping. Leaving Beijing, you drive past the glittering Olympic structures and acres of call centers, office buildings and hi-rise apartments. The last major billboard you see is one where Jackie Chan is inviting you to live in a new residential subdivision on the outskirts of Beijing. An Ping, though, is beyond the glossy reach of a 20-foot-tall Jackie Chan, and way beyond the charms of consumer-friendly Beijing. More than just few hours' drive deep the into flat, wheat fields of the country side, a visit to An Ping is to take a journey into the periphery of modern global capitalism.
It is an example of what happens when you mix the extreme dimensions of late nineteenth century steel production techniques with twenty-first-century global communications and a seemingly infinite pool of low-cost labor.
Steel wire and wire products have been at the forefront of global capitalism since their inception. Technical improvements in the United States during the 1800's made it possible to draw long strands of strong, consistent, high-quality wire that could be woven and twisted. Enough of that wire was produced to circle the globe countless times and eventually led to the series of long and bloody range wars that were fought over the right to fence property with what became known as barbed wire. The eventual succession of the American west to "parceling" land by barbed wire fence forever changed the culture and land management practices in the United States.
Easy rail transportation and 30 years of unabated demand for steel wire products also gave rise to some America's biggest industrial monoliths of the era where names like Carnegie and Mellon were upheld across the land as giants of industry and wealth.
The world has since moved on, but the need for wire and wire products remains as strong as ever. And while automation, robotic welding and other techniques have to come to industry, many of the techniques and practices for working with wire go back well over a hundred years. Still, the more things change, the more they remain the same: Much of industrial processes used to make wire fence and wire mesh continue to be labor intensive work.
At first glance, An Ping appears to be a chaotic series of roads, all filled the same 500 square meter workshop yards, a scene that is repeated again and again. Each shop has crews of men bent over welding grids of wire. If you drive in any direction, you're sure to pass hundreds of work yard shops like this while making your way out of town. If you drive west, you pass hundreds of shops until you get out of town.
But what appears as chaotic and incomprehensible on the ground is really a very efficient production network of individual job shops that is organized, in viral terms, by cell phones, text messages and the Internet. Into this network, amorphous cadres of sourcing agents for global and domestic sales pour their demands for steel wire and mesh work. This is all supported by a transportation infrastructure and steel mill technology built during the last era of fully state-controlled economic planning.
Hebei was the recipient of heavy industrial investment in the 1960's and 70's. While many of those steel mills are now considered inefficient, dirty and not up to world standard, they are very capable of producing large quantities of wire, the composition and basic requirements of which have been the same for about 200 years. In the case of An Ping, sometimes you don't need the world's best equipment to be the world's largest supplier.
But unlike the old days in America and China of big steel being organized around a single, corporate or state-owned entity, or so-called "factory town," An Ping is a network of thousands of job shops, distributors and suppliers, all of whom scale up or down to fit whatever job is at hand. Common scenario: An order comes in, 20 job shops go to work, another order comes, another 30 start, the order changes and five lose their chance to work without a doubt, the Internet has added a wild card, an almost win-the-lottery mentality, to the overall work and operations of any given shop. Now, a big order can come to any shop with a Web site.
No longer is it just the larger shops that can parcel out work because of their sales force and ability to sponsor a travel budget or inventory steel. The global lottery is there for anyone who gets the call, who can respond to the inquiry and who can organize and finance the work and material orders. In other words, today's small job shop may be just one email away from becoming a big player. It's an enticing prospect for newcomers and an almost intoxicating happening for the very few that can get a lucky break of a sizable order.
The new-found prosperity of An Ping has been hard-earned. Seeing workers welding beneath an umbrella in the pouring rain is not uncommon. For most workers, learning English and owning a computer seem impossible dreams for the present. Though far better than it was before the work came, life still remains hard in An Ping, and every worker's tanned face shows a lifetime of physical toil. But most prefer it to the farm, and there is, for the first time ever, a chance for disposable income to save for a child's education, to visit relatives in another city, or maybe even to own a motorcycle or, someday, a car.
But even An Ping, which has gone from nothing to a world production center is less than a decade, has found there is a limit to the sky. Last year, for example, when metal prices in China spiked 30 percent above the world market, work came to a halt. More competition is coming, too. Other depressed industrial areas in northern China have noted An Ping's success and have started their own wire production areas. Likewise, the RMB has gone up in value, diesel fuel costs more for shipping and Indian wire is finding its way to market as well. In large-scale projects, where labor costs less (relative to material costs), An Ping still finds fierce price competition from very efficient American and European producers, as was the case for my American farming client who bought wire both in China and America.
With its fragile beginning and hard fought emergence, An Ping sits at the very forefront of what's happening in the countryside of China's economic revolution. How An Ping finds a way to hold its few gains and keep moving forward to increase the skill and labor value of its people will be the story of non-urban China's development in the coming decades.