China's construction giants cut down to size in foreign projects
A problem-plagued mining project and a derailed Saudi venture teach mainland firms they must do their homework before taking on the world
China's state-backed construction firms have earned an enviable reputation for their competitiveness in delivering huge infrastructure projects on time and under budget at home. But that reputation has taken a battering abroad thanks to two high-profile failures.
The project is more than three years behind schedule. It is hoped ore from the first of the two production lines will be loaded onto vessels bound for the mainland this month. Construction on four more production lines has yet to begin.
Equally embarrassing for Hong Kong-listed Citic Pacific, 58 per cent owned by the state investment body Citic, is the soaring cost of the project, which is already three times over budget.
The two mines were estimated to cost US$2.47 billion but the bill had soared to US$9.1 million by the end of last year. Citic Pacific management has not said how much the other four production lines will cost but analysts say the budget's likely to be US$1.2 billion.
Citic Pacific has placed much of the blame on its chief contractor, state-backed Metallurgical Corporation of China (MCC), which said in February that the cost of completing the construction work it was commissioned to do had surged to US$4.26 billion, 2.4 times the US$1.75 billion budget agreed in mid-2007.
The work include the building of rock crushers, ore concentrators, a pellet plant, material handling systems, a power plant, a desalination plant, workers' camp, workshops, offices and handling facilities at the port.