Construction machinery industry is hard to recover, and the second half of the year will turn around

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**Abstract** Driven by China's rapid economic growth, the country has become the world’s largest market for construction machinery. Steel is the most critical material used in these products, not only influencing their cost but also determining their performance and reliability. "The development of key raw material technologies and the evolving market dynamics are highly significant and deserve our close attention." Recently, at the 2013 Construction Machinery Product Development Forum held in Beijing, industry experts discussed future trends and emphasized the importance of collaboration between the construction machinery sector and related industries like steel to achieve mutual benefits. **Construction Machinery Industry Faces Challenges** From March 2011 to March 2013, the Chinese construction machinery industry operated under difficult conditions for 24 consecutive months. According to the financial reports of five listed companies in the sector, total net profit in 2012 reached 10.186 billion yuan, a decrease of 18.37% compared to the previous year. Revenue fell by 4.29%, reaching 98.032 billion yuan. Meanwhile, the China Construction Machinery Industry Association reported that the top 13 domestic enterprises saw sales revenue drop by 3.68% to 369.86 billion yuan, with profits falling by 22.343 billion yuan, a decline of 34.1%. The overall profit margin dropped from 8.83% in 2011 to 6.04% in 2012, while financial expenses surged by 73.8%. Although early 2013 data showed a 23.15% year-on-year increase in production and sales of eight major construction machinery products, industry insiders noted that this growth was largely due to low base figures from the previous year. Therefore, it does not yet indicate a true recovery. Domestically, large-scale infrastructure projects had previously driven strong demand, but with tightened investment policies and high inflation, the market contracted sharply. While some new infrastructure projects were approved, the impact on the industry will take time to materialize. Internationally, export challenges have increased due to trade barriers. For example, Brazil raised import tariffs on Chinese construction equipment by 25%, making exports more difficult. Additionally, overcapacity and product homogenization have intensified competition within the industry. Although domestic products have improved in quality, they still lag behind foreign counterparts in terms of durability and reliability. Despite these challenges, there are positive signs. Production and sales have stabilized after a sharp decline, and long-term prospects remain optimistic. With continued economic growth, the construction machinery industry is expected to see better development over the next two decades. In the short term, policy support is expected to gradually take effect, and the second half of 2013 could mark a turning point for the sector. **Collaboration Between Steel and Construction Machinery Industries** Industry leaders at the forum emphasized the need for closer cooperation between the construction machinery and steel sectors. As a major consumer of steel, the machinery industry accounts for 19.5% of total steel consumption, with construction machinery being one of the largest sub-sectors. In 2012, the sector consumed 15.2 million tons of steel, representing 12.2% of the machinery industry's total steel usage. Steel used in construction machinery includes a wide range of products, such as medium and heavy plates, high-quality bars, and profiles. Medium plates accounted for the largest share at 63.1%, followed by bars (20%) and profiles (8.1%). While domestic steel producers meet most of the industry’s needs, certain high-performance materials still face quality and consistency issues. For example, high-strength engineering plates are available domestically, but their pass rate and surface quality remain below international standards. Wear-resistant plates and high-quality steels used in bearings and gears also show gaps compared to imported products. To address these challenges, the industry suggests several collaborative measures: **First**, establishing an information exchange platform to enhance communication between the two sectors. This would ensure seamless coordination between steel production and construction machinery demand, and facilitate regular discussions to solve industry-specific issues. **Second**, strengthening industry research to provide valuable insights to both steel and construction machinery companies. By integrating market data and demand trends, businesses can make informed decisions and drive sustainable development. **Third**, encouraging strategic partnerships between steel producers and construction machinery firms. These collaborations should include joint R&D, process optimization, and regular exchanges to ensure timely feedback and continuous improvement. **Fourth**, promoting cooperation in overseas expansion. The steel industry can support construction machinery exports by facilitating access to international markets, while the export of machinery can indirectly boost steel exports as well.

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