THE
EQUIPMENT SUPPLY INDUSTRY TO SUGAR MILLS, ETHANOL AND ENERGY IN BRAZIL: AN
ANALYSIS BASED IN LEADING COMPANIES AND KEY-ORGANIZATIONS OF SECTOR AND OF LPA
OF SERTÃOZINHO
Lara Bartocci Liboni
Faculdade de Economia, Administração e Contabilidade
de Ribeirão Preto (FEA-RP), Brazil
E-mail: lara.liboni@gmail.com
Luciana Oranges Cezarino
Universidade Federal de Uberlândia (UFU), Brazil
E-mail: lucianacezarino@fagen.ufu.br
Michelle Castro Carrijo
Universidade Federal de Uberlândia (UFU), Brazil
E-mail: michellecarrijo@fagen.ufu.br
Rudinei Toneto Junior
Faculdade de Economia, Administração e Contabilidade
de Ribeirão Preto (FEA-RP), Brazil
E-mail: rtoneto@fearp.usp.br
Submission: 22/05/2015
Revision: 10/06/2015
Accept: 24/07/2015
ABSTRACT
This
study aims to analyze the profile, organization, efficiency and innovation in
the supply industry equipment for sugar mills, ethanol and energy in Brazil,
contributing to an important discussion on the competitiveness of this
industry. Therefore, the study was based on analysis of information obtained
from two surveys: the first held with representative organizations and two
industry-leading companies located in the cities of Sertãozinho and Piracicaba;
and the second, through interviews with companies in the Local Productive
Arrangement (LPA) of Sertãozinho, known as the Silicon Valley Ethanol. The
results suggest that the increasing modernization of the sector will require
greater efforts from equipment industry to provide plants with the necessary
technological innovations and potential efficiency
gains and that the constituent companies of this industry, few invest in
technology and professional training, in other words, are lacking in management
training, which leads to loss of valuable opportunities, international market
share is tiny, most companies turn to private sources of financing, and
companies seem unaware of the real benefits of cooperation, although they
appear in most companies in this industry.
Keywords: Equipment Supply Industries, Local Productive
Arrangement; Sugarcane Industry
1. INTRODUCTION
Understanding
the competitiveness of the sugarcane and energy industry is of fundamental
importance for Brazil, not only because it is an activity that the country has
dominated for centuries but also because the industry has obtained major gains
in productivity and efficiency, becoming one of the most competitive
agro-industrial activities in Brazil.
The
industry’s development has been aided by a combination of good soil and climate
conditions and a series of well-defined public policies throughout the
industry’s history that resulted in a large increase in the number of plants in
the 1970s and 1980s and strengthened suppliers of machines and equipment for
the mills. As a result, in addition to agricultural competitiveness, the
sugarcane industry is also highly competitive in the production of ethanol,
sugar, and energy.
This
industrial competitiveness has been achieved by developing both productive
processes and the equipment involved in these processes. As such, the equipment
supply industry has made important contributions to the sugarcane industry’s
competitiveness.
Both
the arrangement of the equipment supply industry and its experience have been
determinant factors so that its competitiveness permeated the industry as a
whole. The industry is characterized as essentially national capital and is
strongly concentrated in the state of São Paulo.
The
sugarcane industry’s leading products are sugar, ethanol, and, more recently,
electric energy. It is a very traditional industrial sector in the Brazilian
economy, dating back to the colonial period and has remained one of the main
industries in the country in terms of share of GDP, employment generation, and
international integration (Sugarcane Industry Association - UNICA, 2010).
In
recent years, the sector has expanded due to continuous growth in the
production of alcohol, sugar, and sugarcane. Ethanol production jumped from 11
billion liters in 2001/2002 to 28 billion liters in 2013/2014; during the same period,
sugar rose from 19 million tons to 37 million tons, and the production of
sugarcane grew from 300 million tons to 653 million tons (UNICA, 2009; EPE,
2014).
However,
the sector is now going through an enormous crisis, not only a conjuncture
crisis, but a result from wrong choices made by political leaders in Brazil,
that somehow favored the gasoline, pushing the ethanol price down and its
competitiveness. However, despite the actual crisis this is the most important
agricultural sector in Brazil and has invested considerably to enhance process
technologies and competitiveness.
Power
plants (or industrial plants) have a set of equipment for each of the stages of
extraction, treatment, fermentation, and distillation, in addition to equipment
for energy production, the transportation of raw materials, and the procurement
of water and water treatment, among others.
Productivity
in the industrial stage depends on both the development of capital goods in
different stages of the production process and engineering projects to
integrate different components in the plant. The industry is comprised of some
companies that design the plant as a whole and a large set of companies that
develop different machines, equipment, and components (Sugarcane Equipment Industry
Association of Sertãozinho - CEISE, 2009).
The
technology for the supply of capital goods for plants is essentially national.
The sector is dominated by national companies with low level of imports and
foreign capital. The industry is located primarily in the regions of Piracicaba
and Sertãozinho, in the state of São Paulo, and features industrial
agglomerations, particularly in the mechanical and metallurgical sectors.
The
industry’s organization is different in each region, both in relation to the
degree of integration and the size of the companies and their strategies. This
type of industrial organization, in the form of local production arrangements,
contributes to greater efficiency in the sector and greater dynamism for the
regions in which they are located (CEISE, 2009).
A
number of questions arise in relation to the industry’s performance, including:
what is the equipment supply industry’s ability to keep up with the demand
generated by the sugarcane industry and it advances in the agronomical
processes, and how does innovation occur in these industries? This study seeks
to answer these questions by assessing some of the characteristics of these
industrial agglomerations. In addition, we sought to characterize the
constituent companies of the industry, analyzing the profile of companies, of export,
innovation, financing and major challenges and opportunities encountered by the
sector.
The first
qualitative research was based on a set of non-structured interviews conducted
in 2011 with representatives and experts from the industry: Adésio José Marques
of the Sertãozinho Center for Industries (Sugarcane Equipment Industry
Association of Sertãozinho – CEISE); Octávio Valseschi, Coordinator of Master
Technology Administration for Sugarcane Industry – MTA at the Federal
University of São Carlos (São Carlos Federal University – UFSCAR); Antônio de
Pádua of the Sugarcane Industry Union (Sugarcane Industry Association – UNICA);
José Luiz Olivério of Dedini[1];
Luis Biagi of Renk Zanini[2];
and Marco Pastorelli of Unisystems[3].
The
second qualitative research was a online survey and was based on a semi-structured
questionnaire for all companies of LPA sent by CEISE and the Department of
Industry and Trade of Sertãozinho, during 2014. Altogether they were received
44 responses to the questionnaire, although some incomplete. After
standardization data base 36 remaining valid replies.
The
choice of method is justified by the need to get a general view of the
organization and equipment of industry configuration in the alcohol sector as
well as characterization of the companies of this industry. Secondary data were
also used, which were acquired from databases such as the Sugarcane Industry
Association (UNICA), the Brazilian Association of Machinery and Equipment
Industry (ABIMAQ), the Brazilian Institute of Geography and Statistics
(Instituto Brasileiro de Geografia e Estatística - IBGE), and the Annual List
of Social Information (Relação Anual de Informações Sociais - RAIS). The
instrument for data analysis was content analysis, which used to understand the
information and systematize the knowledge acquired during the interviews.
2. LOCAL PRODUCTION ARRANGEMENTS
The
debate over the issue of industrial clusters is an old one in the Brazilian
economy, both for evaluating the determinants of agglomerations and verifying
their impact in terms of competitiveness, the introduction and development of
technological innovations, and the impact on regional development, among other
aspects. The literature on local production arrangements (LPAs), defined as a
geographic and sectoral concentration of small and medium enterprises that
maintain a systematic relationship, spans various fields of the economy: the
industrial economy, the technology economy, the regional and urban economy, and
other areas that seek to analyze specific impacts from the presence of LPAs
(TELLES; TONETO JR, 2007).
In
his Principles of Economics, Marshall (1920) highlighted the idea that external
economies that originate from the agglomeration of certain economic activities
can enable efficiency gains for participants by attracting suppliers, making
skilled labor easily available, or by other means. “External economies depend
on the general development of the industry [...] and they can frequently be achieved
through the concentration of many similar companies in certain places; or, as
is often said, by the industry’s location” (MARSHALL,
1996, p. 315).
Therefore,
the main advantages of the geographic and sectoral concentration of companies
are the presence of external economies and the possibilities for joint
strategies, which may be an important source of generating competitive
advantages for business clusters (IPT, 2008; MARINI; SILVA, 2012).
These
joint strategies depend on local agents (companies and institutions) that are
able to stimulate their competitive abilities through cooperative actions such
as professional training, the creation of export consortia, contracting
specialized services, and establishing collective technological centers. The union
of incidental external economies with those obtained through deliberate joint
actions results in a “collective efficiency”, which determines the competitive
capacity of the local companies (SCHMITZ; NADVI, 1999 cited in MARINI; SILVA,
2012).
A priori,
the advantages of geographic and sectoral concentration result from the
installation of supplier companies in the region, the provision of collective
goods, specialization of local skilled labor, tacit knowledge that is created
from the sector, and knowledge about what each firm is producing. Furthermore,
as mentioned previously, the advantages of the companies’ geographic and
sectoral concentration can be enhanced by the companies’ proactive behavior in
organizing themselves, thereby creating power in negotiations with suppliers,
making room for joint investments in research, developing strategies for access
to foreign markets, and encouraging close relationships with universities,
public bodies, etc. These arrangements can elevate the competitive condition of
firms by obtaining efficiency gains from acting as a group (TELLES; TONETO JR,
2007).
LPAs
are important for the development organizations, and they can influence
economic and social development both regionally and nationally (VICARI, 2009;
JAUHAR, 2008). The challenges of economic growth and the need for more
equitable socioeconomic development between regions have led the Brazilian
federal government and state governments to encourage the organization of LPAs
in various regions of the country. The organization of local industries through
LPAs is part of the industrial policy guidelines set by the Brazilian Ministry
of Development, Industry, and Foreign Trade (TELLES; TONETO JR, 2007; GTPAPL,
2012).
LPAs
can be described as a cluster of firms in a certain production chain in the
same territory or region. More specifically, an LPA is a type of local
production system with a geographic and sectoral concentration, generally of
small- and medium-sized enterprises, that maintain a systematic relationship.
The cluster can consist of companies that manufacture traditional,
low-technology products or technology-based companies (SUZIGAN, et al., 2003).
For
Cassiolato and Lastres (2003, p. 3, 4), LPAs are local clusters that focus on
activities in a specific economic segment and rely on the involvement of
economic, political, and social actors. The companies within the clusters have
ties to each other, even if they are recent. These local clusters demonstrate
participation and interaction between companies that produce capital goods,
provide services, supply inputs, and market the cluster’s products. They are
also related to public and private organizations that support the cluster’s
activities, such as financial companies, political entities, marketing companies,
research and development organizations, universities, and other entities for
obtaining and training qualified labor.
LPAs
have some degree of specialization in one or more of the links on the chain,
such as improving production processes, developing new products,
differentiating the design, managing storage logistics, and developing
efficient distribution channels. All of the agents involved in the productive
and commercial process benefit from these differentials, which are the result
of maintaining a healthy, permanent interaction between the economic and social
actors (PLONSKY; SERRA; ZENHA, 2005).
Cooperation,
regardless of the type of LPA, allows individual companies to operate at levels
of efficiency and productivity that would not otherwise be achievable. Through
interaction networks that are retro-feeding, the physical proximity between
companies and institutions in an LPA fosters, facilitates, and increases the
exchange of tangible assets – final and intermediate goods and services – and
the diffusion of intangible assets such as relevant knowledge for the business
(PLONSKY; SERRA; ZENHA, 2005).
Telles
and Toneto Jr. (2007) note that cooperation between firms can play a
fundamental role in the process of innovation by increasing competitive capacity,
mainly when small firms are competing with large firms, thereby creating
greater capacity for investment and greater diffusion of knowledge. LPAs can
thus encourage the emergence of regional systems of innovation in places they
are located.
LPAs can
be classified according to their degree of organization: (i) informal, (ii)
organized, and (iii) innovative. This classification is based on the market
structure, degree of technological development, level of articulation, and the
size of the companies (MYTELKA; FARINELLI, 2005 cited in PLONSKY; SERRA; ZENHA,
2005).
Plonsky,
Serra and Zenha (2005) argue that the companies in an informal LPA produce
homogeneous or slightly differentiated goods, developed with widely available
technology. These companies require low levels of investment and show reduced
barriers to entry and exit. They also show nascent expertise in management, a
reduced level of technological development, and little cooperation between the
companies in the cluster and with local actors such as clients.
These
companies adopt survival strategies for the markets in which they operate. In
an organized LPA, the companies are more heterogeneous in terms of size,
organizational structure, and strategic capacity. They also tend to be more
specialized, producing differentiated or slightly differentiated goods. Their
level of industrial investment is more robust, creating stronger barriers to
entry. In addition, they employ more sophisticated management strategies and
use relatively modern, but accessible, equipment and technology.
They
show some level of cooperation. In the innovative LPA, there are small, medium,
and large businesses organized hierarchically. The small and medium enterprises
gravitate around the large firms, which act as suppliers. They generally have a
higher level of managerial, financial, and commercial expertise, in addition to
skilled professionals. In this type of LPA, the capacity to innovate is
strategic and cooperation is intense.
Definitions
and typologies of LPAs are widely studied in the national and international
literature. The literature is vast and, in some cases, contradictory (SUZIGAN,
et al., 2003). Many studies focus on defining an LPA and differentiating it
from other arrangements.
In
the present study, the term LPA is used in accordance with Cassiolato and
Lastres (2004), who believe that these arrangements do not show significant
links between agents (nascent cooperation) and that they therefore cannot be
characterized as systems (CASSIOLATO; LASTRES, 2004). The authors use the term
Local Productive and Innovative Systems (Sistemas Produtivos e Inovativos
Locais - SPILs) to define “arrangements where interdependence, links, and
consistent ties result in interaction, cooperation, and learning, with the potential
to generate increased endogenous innovative capacity, competitiveness, and
local development”.
Thus,
machine and equipment industry clusters for the sugarcane sector are considered
LPAs and deserve note for their capacity and potential to generate competitiveness
and innovation.
3. RESULTS
3.1. The Equipment Industry for the Sugarcane Sector
The capital goods sector in Brazil
is responsible for the production of a complex set of machines and equipment
used in the production of other goods. It thereby maintains a direct
relationship with other sectors in addition to playing an important role in the
diffusion and generation of new technologies (State of Minas Gerais Federation
of Metalworkers - FEM, 2014).
The sector is considered strategic for the country's development,
influencing increase in the average total productivity of the economy and
technological diffusion. The dynamics and competitiveness of industry as a
whole depends on the degree of development of the capital goods industry, which
acts as a technical progress diffuser (National Confederation of Metalworkers –
CNM, 2012: pp.3).
This sector consists of the
following groups, according to the National Classification of Economic
Activities: machines and equipment; motor vehicles, trailers and car bodies;
other transportation equipment, which includes the aeronautical segment;
machinery, appliances, and electrical equipment; communications equipment;
medical equipment and instruments, precision instruments, and equipment for
industrial automation; and office machines and information equipment (Brazilian
Institute of Geography and Statistics - IBGE, 2015).
The most important segment in the
capital goods industry, the industry of machines and equipment, is located
mainly in the state of São Paulo. Brazil has
an industrial park for producing machines and equipment that is strongly tied
to the sugarcane agro-industry. The machines and equipment industry allowed the
expansion and improvement of the production of sugar and ethanol (Brazilian
Association of Machinery and Equipment Industry - ABIMAQ, 2010; CRUZ et al,
2013).
The
industry of machines and equipment, tied to the sugarcane industry, is well
developed in the country and is very important to the sugarcane sector’s
competitiveness. The sugarcane sector is also located mainly in the state of
São Paulo, which contains a strong concentration of plants in the central-south
region and the country’s main industrial park, resulting in a concentration of
sectors with high technological intensity, major research centers, and
skilled-labor training.
The
expansion of sugarcane cultivation in Brazil, during the last decade, created
strong incentives for the machines and equipment industries related to the
sector. In addition to the demand associated with new plants, there was also a
significant growth in demand to replace old equipment with more modern
equipment. This replacement of equipment enabled the expansion of productivity
and energy efficiency and allowed for the sale of surpluses.
The
expansion of the sugarcane industry and the consequent increase in demand in
the machines and equipment industries resulted in the entry of new actors in
the sector, including foreign capital in a sector traditionally dominated by
national capital (CEISE,
2009; EXAME, 2013).
In the state of São Paulo, where
most of the equipment industries for this sector is located, there are two
regional production hubs: Piracicaba and Sertãozinho. These hubs historically
developed with the presence of family businesses, which grew and stimulated the
development of suppliers and competitors in the region.
The equipment industry in these
cities is focused on the mechanical and metallurgical sectors. In Sertãozinho,
the industry is strongly related to the sugarcane sector, with the predominant
production of boilers and general-purpose machinery. In Piracicaba, the
industry is much more diverse.
Since
1940, two major metallurgical enterprises have specialized in manufacturing
machinery and plants, and they stand out in this sector: Dedini, in Piracicaba,
SP, and Zanini, in Sertãozinho, SP. These enterprises experienced a major
expansion during the National Alcohol Program - Pro-alcohol. The main Brazilian
suppliers produced approximately 200 independent distilleries (and 200 corresponding
co-generation plants).
The
two biggest manufacturers (Dedini and Zanini) produced, considering the
production peaks, 96 million suits in one year, 81 distilleries in one year,
and an average of 63 boilers per year between 1973 and 1982 (MACEDO; NOGUEIRA,
2004). The best phase for this sector was during Pro-alcohol, when these
companies engaged a significant amount of employees and operated virtually full
time.
Dedini
S.A. Basic Industries, the main company in the sector, is the result of the
consolidation of the activities of Dedini, Zanini, Badoni, and Codistil
(according to DEDINI, 2007). The company has a market share in the sugarcane
industry above 50% and has factories in Piracicaba, Sertãozinho, Recife, and
Maceió. In addition to the sugarcane industry, it acts in other diverse
sectors, including beer, biodiesel, and hydroelectric plants, among others.
Dedini’s
focus, however, is the sugarcane industry, where it produces technology for the
production of sugar and hydrated and anhydrous alcohol and brandy, as well as
machinery for sugar refineries, cogeneration plants, plants for tanks, and
breweries, among others. Dedini also licenses technology for use in breweries,
filtration systems, small central hydroelectric, and the biodiesel industry,
among others. In addition, the company develops products with technology
provided by customers in the fields of pulp and paper, steel, chemicals,
mining, and the automotive industry.
Dedini
has a high vertical integration and is involved in virtually all the stages of
construction for a plant/distillery in the sugarcane industry: engineering
design, viability study, equipment manufacturing, and plant construction. With
approximately 4,000 employees, Dedini develops most of the products for plant
installations internally. It provides engineering services, assembly design,
and viability studies, in addition to producing the equipment, construction and
installation, and maintenance services.
The
company invests in technological development, such as the current project
Dedini Rapid Hydrolysis (DHR – Dedini Hidrólise Rápida), which relies on the
support of the Foundation for Research Support of the State of São Paulo
(Fundação de Amparo à Pesquisa do Estado de São Paulo – FAPESP) and seeks to
develop acid hydrolysis to produce ethanol from the cellulose materials of
bagasse cane.
Zanini,
a manufacturer of industrial equipment for the sugar and alcohol sector, was
also one of the pillars in forming the current industry for plant equipment and
machinery. During the Pro-alcohol program, it grew to 7,000 employees and
operated 24 hours a day in Sertãozinho. With the end of the Pro-alcohol
program, some companies had trouble and there was restructuring in the sector,
including mergers and closings. Zanini teamed up with Renk AG from Germany to
form the current Renk Zanini. Today, in Sertãozinho, several companies excel in
providing specific solutions for the industry.
An important aspect to be considered
is the size of the companies in the two cities. There is greater employment in
smaller-sized companies in Sertãozinho compared to Piracicaba, particularly in
the mechanical sector. In Sertãozinho, 23% of workers are employed in companies
with less than 49 employees, while in Piracicaba, this share is 16%.
Furthermore, in Piracicaba, 38% of
employees in the mechanical sector are employed in companies with more than
1,000 employees, while in Sertãozinho this share is 24% (IBGE, 2010; Annual
List of Social Information - RAIS, 2010). These facts
demonstrate that in Piracicaba, the supply of capital goods for the cane
alcohol and energy sector gravitates around one large company, Dedini, which
has a strong degree of vertical integration. In comparison, in Sertãozinho,
there are large companies with a lower degree of integration, leading to the
emergence of a large number of small suppliers.
The
city of Sertãozinho has one of the largest clusters in the country of suppliers
and service providers for the sugarcane-alcohol sector, in addition to the
presence of several units from the sugarcane agribusiness. The city has seven
plants producing sugar and alcohol and 500 companies in four industrial
districts, 90% of which are focused on the sugar-alcohol industry (CEISE,
2010).
In
the period 2008-2012, 81 plant projects have been developed in the country. To
meet this demand, the Sertãozinho industry expanded significantly. The number
of companies has grown from 500 to 700. More than 3,000 workers were required
by the city that, at its peak, managed to employ about 47,000 workers (EXAME,
2013).
This
arrangement is the result of a crisis in the sector in the 1990s, with numerous
mergers and company closings, which drew skilled labor to the city, and a
number of small companies were created to serve the sugar-alcohol sector. The
city’s industrial capacity is strong: in addition to having one of the largest
industrial parks in the state of São Paulo, the city historically developed an arrangement of companies focused on
meeting the industrial demand of the sugar industry.
The
industrial capacity of this LPA allows the companies to develop all the
necessary equipment for the installation of a complete plant. Despite advances
in the processes and an increased number of products, it is important to note
that few companies in the city invest in technology and professional training.
The companies essentially respond to the demand of the integrating companies.
A
large number of the entrepreneurs who own these companies have only technical
training from the old Zanini, which was at the forefront of producing and
selling to other companies. However, these entrepreneurs are lacking in
managerial education, which often results in the loss of valuable
opportunities. These entrepreneurs need to invest and change the competitive
pattern of their industries.
The proximity of these companies in the informal LPA is
one of the main elements of the industry’s competitiveness. The fact that the
companies are located in the same physical region benefits buyers because they
can purchase all the equipment they need in only one visit. Moreover, these
companies have developed a way of working together in partnerships, which is
very important. They collaborate on sales and develop cooperative projects.
Thus, they have a greater competitive advantage compared to the few companies
that are not located in the city of Sertãozinho.
3.2. Efficiency and Innovation
The
equipment industry for the plants was largely responsible for the success of
the Brazilian alcohol program because it facilitated processes that enabled
significant increases in the conversion rate and thus expanded the potential
use of sugarcane.
Throughout
these years, efficiency gains were incorporated into different stages of the
productive process: extraction, the processing of the liquid, fermentation, and
distillation. The efficiency standards that were achieved, namely the high
maturity of the processes used, made incremental gains difficult for the
production of sugar and alcohol in the industrial stage. A study from
Copersucar[4]
on plants in the central-south region showed the following indicators for
conversion efficiency (Table 1).
Table 1: Indicators for conversion efficiency and agricultural
productivity.
|
Efficiency |
Average |
Maximum |
|
Extraction - % |
96.2 |
97.5 |
|
Treatment - % |
99.2 |
99.8 |
|
Fermentation - % |
91.1 |
93.0 |
|
Distillation - % |
99.6 |
99.6 |
Source: Macedo and Nogueira
(2004, p. 12 and 14).
The
major changes in industrial efficiency occurred with new technologies (full use
of the cane and the development of the hydrolysis process) and the reduction of
input consumption (energy and water), particularly in regard to the exchange of
equipment that can extend the co-generation of energy. It is important to note
that the efficiencies achieved by these companies enabled them to operate in
other industries: beverages, paper and cellulose, energy, mining, and oil. Most
of these companies are exporters for both sugar and ethanol plants abroad and
for other industrial branches.
The
companies providing equipment advanced towards turnkey solutions for supplying
plants, distilleries, and co-generation systems. The plant is delivered in full
working condition and, in some cases, with insurance and performance
guarantees. Dedini had already developed plants that integrated biodiesel with
ethanol and bioelectricity (three-bio plant). The turnkey packages can be
obtained from the companies mentioned above or from engineering companies and
contract suppliers that develop the projects. The suppliers have different
levels of integration, with some companies that develop almost the entire
package and others that contract a larger amount of input from suppliers.
The
installation of a complete plant involves the following steps (Table 2).
Table 2: Industrial capacity.
|
Industrial Capacity |
Industrial Focus |
|
Design and develop solutions |
Technology Process engineering |
|
Define and specify solutions |
Basic engineering Equipment engineering |
|
Execute solutions |
Produce Install Assemble |
|
Commission and guarantee solutions |
Monitoring Control and performance Technical assistance |
Source: CEISE, 2009.
During
the Pro-alcohol program, the national equipment industry supplied 200 complete
distilleries in 10 years. For reference, the historical installed capacity is 5
plants/trimester and 20 per year, with energy co-generation. The capacity for
providing installed industry today differs according the order of magnitude of
new projects (Table 3).
Table 3: Installed supply
capacity
|
Plants by order of magnitude |
|
|
Typical Solution 1 |
Typical Solution 2 |
|
80,000,000 liters/year of alcohol |
180,000,000 liters/year of alcohol |
|
1,000,000 tons of cane/harvest |
2,160,000 tons of cane/harvest |
|
40 turn-key plants/year |
24 turn-key plants/year |
|
Lead time 2 years |
Lead time 2 years |
Source: CEISE, 2011
In
terms of co-generation, the supply capacity is 40 plants of 30 MW + 1.2 GW/year
(CEISE, 2011). It is noteworthy that the time between the investment decision
and the time when a plant can begin operating is approximately five years. The
main determinant for this term is the agricultural phase: the establishment of
nurseries for sugarcane and the cane field.
Thus,
once the investment decision is made, industrial equipment is not the first
phase of investment. The construction and installation of a plant is performed
during the establishment of the agricultural phase. Thus, no restrictions for
equipment suppliers to meet planned investments are observed because the
equipment has already been contracted with the supplier. Suppliers already have
projects to be delivered over the next decade.
Much
of the technology involved in the sector is in the public domain. The
industry’s competitiveness is based mainly on scale (number of people in demand
and the size of the production park for sugar and alcohol) and the proximity to
consumer markets, which facilitates technical assistance and equipment
maintenance.
The
specificity of the raw material (sugarcane), which has a defined period for
harvesting and a specific interval between the collection and extraction of the
juice to prevent a loss of quality, requires the equipment companies to develop
an efficient assistance system to attend to the plants in the case of equipment
failure. Thus, the proximity of the consumer market is determined, in large
part, by the concentration of the equipment sector in Piracicaba and
Sertãozinho.
Regarding
the productive and technological characteristics of the equipment supply
industry, a typology for the companies, which differs according to both the
products and the manner in which they work, can be generated (Figure 1):
Figure 1: Typology of equipment industries in the sugar-alcohol sector.
Source: Author's elaboration.
The
companies in the public domain are the companies that produce low-technology
equipment such as tanks, pipes, and chains. These companies acquire the
know-how for equipment and production and do not perform research and
development; they are small businesses that are outsourced by the larger
companies.
The
manufacturers are the companies that manufacture equipment that involves more
aggregated technology, but they do not have integrated engineering. These
companies manufacture the equipment necessary for the implementation of a
plant, but they follow the guidelines of an engineering company that develops
the projects and the technology necessary for the equipment and the processes.
The engineering companies are responsible for research and development in the
areas of production and processing technology.
These
companies sell their projects, acting in partnership with manufacturing
companies. The mixed companies manufacture equipment with higher aggregated
technology and have an internal research and development center. These
companies are responsible for their own projects and invest in production and
processing technology. Generally, mixed companies are focused on producing
certain products such as industrial automation.
The
companies in this sector, particularly in Sertãozinho, are mostly public domain
or manufacturing companies, with fewer mixed companies and engineering companies,
which shows that the development of research and technology in these companies
is less intense because only a small proportion of the companies falls into
this typology. It is noteworthy that despite the low technological intensity,
the public domain and manufacturing companies are responsible for diverse
incremental innovations in processing and production.
When
considering the competitiveness and longevity of this industry, it is important
to understand how the profile of public domain and manufacturing companies can
be transformed into a profile of companies that invest in research and
development. It is not only necessary to characterize the types of companies
but also to understand their equipment. There is specific equipment, with varying
degrees of technology in development, for each step in the industrial process
for the production of sugar, ethanol, and energy (Table 4).
Table 4:
Equipment for steps in the production process and potential productivity
gains.
|
Process |
Steps |
Equipment per Step |
General Equipment |
Potential Productivity Gains |
|
Extraction |
MP, weighing, washing, preparation,
grinding |
Reducer Grinder or diffuser Food table Turbine Chippers Shredders |
Tanks Pumps Automator Dunnage Pipes Engines Valves Currents Reducers Cranes Winches Sensors Actuators Controllers |
Food table Chippers Shredders Millers Tracks Evaporators Distillation columns Boilers Automation (sensors,
actuators, controllers) |
Source: Author's elaboration.
Table
4 shows that the equipment manufactured for the industrial process in plants,
both for the steps in the production process and for the general equipment,
constitutes simple equipment with low technological intensity. Nevertheless,
there is still the potential for innovation that will increase productivity
gains through equipment or processes.
In
general, the equipment industry for the sugarcane sector, which focuses
predominantly on metallurgy and mechanics, has low technological intensity.
Therefore, there is low investment in research to develop more elaborate
technologies.
However,
this equipment industry has innovated throughout its history. Incremental
innovations for production and processing have brought greater efficiency to
the production of sugarcane derivatives. One example is the adaptation of steam
turbines in the industrial process for energy efficiency and, later, the sale
of surplus electricity.
This
innovation was a major gain for the sector. Other examples, such as increased
capacity for boilers and greater efficiency for tracks, show that there are
innovations in the industry, but with low technological intensity. However,
there are companies that do develop more elaborate technologies, such as in the
industrial automation industry, in which companies have created more efficient
technologies for management and processing control within plants.
What
is clear is that the industry will have to incorporate investments in research
and development so that there is a technological upgrade corresponding to new
processes that are designed, as is the case with hydrolysis. The industry will
need to stop being reactive because the production of second-generation alcohol
will bring a new technological frontier with new characteristics of raw
materials, requiring new processes.
3.3. Features of LPA sugarcane companies from of Sertãozinho
After
the analysis of the leading companies and some key organizations in the sector,
the study, in order to deepen understanding of the dynamics and the profile of
the machinery and equipment industry to sugar mills, ethanol and energy in
Brazil, also analyzed the companies that make up the Local Productive
Arrangement (LPA) of Sertãozinho. Sertãozinho is a town from the countryside of
the state of Sao Paulo that presents one of the largest clusters of suppliers
and service providers for the sugarcane sector.
The
industrial capacity of this LPA allows industries to develop the necessary
equipment for turnkey industry plants. The city has seven mills producing sugar
and alcohol and 500 companies divided into four industrial districts, 90% of
which focused on the sugar and alcohol sector (CEISE, 2010). This model
resulted from the own sector crisis in the years 90, with the mergers and
closing a business, which resulted in a labor-skilled workers in the city and a
number of small companies were created to serve this sector. Despite the
proximity, cooperation to the structuring of the formal arrangement is not yet
a fact.
This
section characterizes Sertãozinho LPA through online survey during 2014. It was designed a structured questionnaire
for all companies of LPA sent by Center of Sertãozinho Industries (CEISE) and
the Department of Industry and Trade of Sertãozinho county. Altogether they
were received 44 responses to the questionnaire, although some incomplete.
After standardization data base 36 remaining valid replies.
The variables addressed were: Profile of
organizations, levels of export, innovation, financing activities, key
challenges and opportunities encountered by the sector.
Of
the 36 companies responding, it is possible to identify the oldest companies,
founded in 1964 to start-ups in 2014. The median was 2000, which means that
half of the sample is made up of companies with founding date from the 2000s.
As for the gross sales, 49% of respondents had a value of more than 2.4 million
in 2013.
It
was also asked for companies to identify three main products or services on the
market. The groups found reflect the economic profile of the city and
agriculture, in particular with regard to the sugar-energy sector. There is a
specific group to sugar-energy plants, but there are also support the entire
production chain companies. Since suppliers of implements and equipment for
maintenance of industrial services, education and consulting (Table 5).
Table 5: Categorization of the products / services
offered
|
ITEMS |
|
|
Education, Training and Consulting |
Vocational education
- Regular courses, Assistance to companies - Courses and technical and
technological advice; Technical and technological services; Business Consulting; Tax Planning; Engineering Projects. |
|
Implements for plants |
Diffuser Sugarcane,
Steam Generator, soot blower, Centrifugal Sugar, Control Valves, lubrication
system, Boilers, Surface Condensers, turbines, Modular Panels; Heaters and Pressure Vessels etc. |
|
Auxiliar services |
Asset Protection,
Vehicle Tracking, Personal Protection Supply. |
|
Equipment Maintenance |
Electronic
maintenance, carbon steel pipes, fittings, industrial maintenance, bearing,
spare parts in bronze iron, conveyor belts, rotating screens. |
|
Plants Sucroenergéticas |
Sugarcane residual,
ethanol; power management. |
|
Industrial services |
Industrial Packing,
Instrumentation Maintenance, Industrial Automation, Research and Development
Electronics, Industrial Maintenance. |
|
Others |
Clothes, panels, LED
spotlights, cabinets, toiletries. |
Only
five responding companies have only Sertãozinho and region as their main sales
destination. The sales target is concentrated in other Brazilian states,
and other regions of the state of São Paulo. Among the respondents,
¼ of the companies have export practices. Of these, half say export
regularly. Export destinations are Latin America and Africa. The main
difficulty faced by the group of respondents for not export concerns the
difficulty of access to markets and then by certifications necessary to export
process.
Another
relevant topic is the access to financing capital. The resources
availability is needed in investment projects preparation, working capital and
maintenance of core activities of the organization. When asked about
funding access to 64% of respondents say they have access to sources of
funding. In addition we sought to identify which banks have been used as
financing sources. For this, we asked the respondents to mark among public
banks, private banks and the National Bank for Economic and Social Development
of Brazil (BNDES).
Respondents
could select more than one bank, since it is possible to have funding in
several banks: only 16% of respondents have used all sources of funding; in 41%
of companies will use financing in private banks; in 34% of companies will h
access to sources of financing by BNDES; and in 25% of companies will h access
to sources of financing other public banks;
When
asked about the main difficulty in accessing financing support, the most
frequent topic is interest rate, followed by required guarantees and payment
terms.
We were able to identify whether companies
are participating in associations and what was their level of
involvement. Among respondents 66% say join associations, mostly citing
CEISE-BR, the Union of Industries Canavieiras (UNICA), the Federation of São
Paulo State Industries (FIESP) and the Center of São Paulo State Industries
(CIESP).
When
considering only the participating companies 62% of them also develop some
joint action with another company, especially in the responses to joint product
development (innovation activities), training and input purchase.
It
was also asked which the benefits of cooperation activities were perceived. One
of the pointed benefits is access to markets, also previously mentioned during
the analysis of exports and new markets. However, another point that stood
out was the level of companies that did not respond this question. It can
be inferred that many of them do not clearly distinguish benefits from these
activities.
Among
evaluated companies two thirds use technological services provision such as
laboratory tests, technical reports and certifications. These services,
according to respondents, are usually mostly conducted in Sertãozinho or next
region.
On
innovation capacity in the organization, 66% of them claim to carry out
innovative activities in process and product. Regarding amounts invested they
vary between 1 and 10% of the total budget of the organization. This may
also be related as to a lack of research department and structured development
(existing in less than 1% of the responding organizations).
Finally,
there have been two open questions about the main challenges and opportunities
for these organizations today.
Several
challenges were meaningful and was possible to group them into two categories
macro (internal and external environment), as some say respects to own
questions of the organizations while others are focused on the macro
environment in which organizations are located. Items were further divided
into 8 major challenges. Figure 5 schematically shows each item, which
will be specified in sequence:
Figure 5: Main Challenges in Sertãozinho Sugarcane LPA
Source:
Author's elaboration.
Emanating
from the external environment challenges of survival were described. One of
them was the financial crisis period - started in 2008 - along with crisis
period of sugarcane. "The crisis that shakes the region makes it that
people spend less with my company", so the challenges are "market and
effects of the financial crisis." To another "our main challenge
today, would the current economic situation of the regional and national
sugar-alcohol market."
In
this topic, several challenges relate to the lack of public incentives. "The
main challenge is to survive with the lack of support and investment of the
politicians in our industry," "lack of incentive to mechanical metal
industry." Also question bureaucracy and taxation issues
primarily related to excess taxes paid and labor laws "predatory and
outdated".
Another
challenging point regards to foreign competition of imported
products, citing the case of "competition with Asian manufacturer". This
fact turns out to strengthen a number of references to efficiency and cost
competitiveness issues and seeking to "improve industrial performance,"
"improve logistics structure" or issues of "competitiveness and
cost."
Internally
there are several challenges related to train labor resources. This
point is recurrent as in the previous topic 75% of respondents pointed to
problems qualifying. Cite "training and staff qualification",
"Quality Workforce in the areas of production, and sales" and provide
"hand-to-work enough qualified that meets industry expectations."
The
issue of skilled labor turns out to be related to business expansion
challenges as a challenge is "growth structure while maintaining the
quality service" with specific challenges in "commercial, in the
search for new markets." In general challenges have been to "seek
new clients, dealing with delinquent customers, grow, handle and measure the
productive capacity".
Finally,
this set of external and internal factors culminate in financial
challenges. For some, the biggest challenge is to "keep the company
operating", "working capital" and "financial resources to
fund marketing and business trips to new markets."
The
opportunities cited are distinct, focused mainly on competitive advantages acquired
over time by the organizations. Generally observe some market
opportunities in "new markets" that focus on "different in
different markets of the sugarcane".
Others
are guided in "old customers" to be "recognized for service
quality” or able to remain active for "have multiple certifications"
making it easy to get quotes and customer contacts. There are also those
who have seen an opportunity to provide customized services to low prices for
other agricultural sectors.
4. FINAL
CONSIDERATIONS
This
study aims to analyze the configuration, efficiency and innovation in the
equipment industry to sugar mills, ethanol and energy by means of a survey of
business leaders and key industry bodies as well as to know the profile of the
companies constituting the largest cluster of companies in this sector in
Brazil, located in Sertãozinho, Sao Paulo.
The
first point to note is the strong modernization of existing plants. This
process has generated strong growth in manufacturing employment in the city in
which this industry is located. The industry is characterized by national
capital and is heavily concentrated in the state of São Paulo, which
demonstrates the need to be close to the consumer market. The technology is
relatively simple and does not constitute a serious obstacle to the entry of
competitors in this segment.
Thus,
despite the possibility of importing equipment, the practice is quite limited.
It is important to note difficulties, however, that the appreciation of the
currency in the country created for domestic producers. The growth of such production
plants could have been even higher if the country had not such a high cost, allow
speed up its modernization programs and technological modernization,
replacement of equipment, and expand the co-generation of energy.
This
component producers' sector was not a barrier to the expansion of sugar cane
and energy sector. However, the increasing modernization of the sector will
require efforts in the equipment industry to provide the necessary
technological advances and possible efficiency gains for industry.
Additionally,
with analysis of the machinery industry companies and equipment for the sector,
located in the APL of Sertãozinho, it was realized a business opportunity to
support organizations and for companies listed in the group Education, Training
and Consulting. Guidance and assistance during the export process, from the
design of new products and seeking markets can generate training opportunities
and relevant advice.
Despite
advances in processes and increases in products, it is worth noting, however,
that few companies in the city invest in technology and training. They are
lacking in management training, which leads to loss of valuable opportunities.
These entrepreneurs need to invest and change the competitive industry
standard.
It
was noted also a need for greater cooperation among companies and between
companies and supporting organizations and / or representation. The growth of
the sector, in particular through access to new markets could be facilitated if
the companies meet in joint associations or missions.
Working
in partnership, they would increase their bargaining power in the negotiation
rounds, would share costs of prospecting and transaction and experiences and
could have greater ease in seeking financial support from public and private
institutions.
Finally,
another suggestion would be to seek support in government agencies,
universities and all possible institutional frameworks to assist in the export
process. With specific regard to industrial exporting process can be cited here
Apex program and Peiex Brazil.
It
is suggested to assess how these organizations are perceived by companies. In
many cases (especially smaller ones), they do not see themselves represented by
these associations. The non-materialisation of the benefits offered by these
entities may be the beginning of low involvement generation companies with
these organizations.
Future
studies should deepen these discussions on what should be invested in R & D
in the sector and what can be done to encourage such investment. An analysis of
the main research abroad to meet new ethanol production techniques and the
growth prospects of international competition make it imperative for the
domestic industry of machinery and equipment for sugarcane agro-industry is
permanently update, create new products, and meet the changes generated abroad
to preserve the country's competitiveness in this sector. Therefore, how should
conduct further studies on how to encourage cooperation between companies and
between them and the entities to which strengthen the industry in the country.
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