The Cavagna Group of Italy, one of the world's largest valve producers, has entered a joint venture with the Thailand-based SV Metals Ltd to produce liquid petroleum gas (LPG) valves and equipment in Thailand to supply Asian markets.

SV Metals-Cavagna Ltd will be established to produce five million valves a year by the end of next year, doubling SV Metals' current capacity.
Cavagna will invest by bringing in approximately 50 items of modern machinery to increase production efficiency and product competitiveness.

Davide Cavagna, chief executive officer of the Cavagna Group, said his company had maintained a leading position in the world market although production costs in Italy were high.
He said the investment in Thailand was substantial and the first direct investment by Cavagna in Asia.
It has had an operation in Malaysia through the acquisition of a European company in 1999.

SV Metals currently supplies 40 per cent  of its production to PTT Plc (Petroleum Authority of Thailand) and the rest is exported through the Shell Group.
Total demand for gas valves for new gas tanks and replacements in Thailand was around four million units a year, according to Treepon Riebroicharoen, managing director of SV Metals.

He said that after the joint venture was set up, each production unit would find its own area of expertise to achieve economies of scale. It was likely that the Thai operation would produce more hand-wheel gas valves and fewer compact valves.
The new venture is expected to double its revenue to 400 million baht (US$9.6m) and assets to more than 200 million (US$4.8m) after reaching full capacity next year.
Exports would become a major business in the future, as SV Metals-Cavagna would supply current Cavagna clients in Asia.

Mr Cavagna said the company would also relocate its regional office from Singapore to Thailand to strengthen its distribution network.
The two business families held several rounds of negotiations over the past year before signing the agreement yesterday in Bangkok.
"We had learned lessons to overcome differences in ways of doing business, culture and languages. The first time we met, we had to find a neutral place for negotiation and we were both comfortable in London," Cavagna said.
Established in 1949, Cavagna Group produces three lines of products: LPG gas valves, high pressure equipment and LPG and natural gas regulators. Its annual turnover is approximately US$150 million, serving markets in 110 countries from its production bases in Italy, Portugal, Venezuela and Malaysia.

SV Metals was set up in 1988 to produce gas valves with an initial capacity of 80,000 units a year.
It later expanded to 2.5 million units, generating some 200 million baht (US$4.81m) in revenue per year.