As a result of an economic downturn, slowing down of the mining machinery industry has been a fact.
Sluggish market demand
Wang Jisheng, deputy director of Mining Machinery Branch of China Heavy Machinery Industry Association, said, “The number of orders of some key enterprises has started to decline since mid-2011, and this situation hasn’t improved significantly so far." By the end of 2012, the number of orders of the mining machinery had declined by 16% . There hasn’t been a sign of recovery till this year. We estimated the orders will drop further in the second half of the year.
Wang continues, “Insufficient market demand is the key factor to the slowing down.” Affected by the slower economic growth of China and the shrinking global market demand, many enterprises face the problem of insufficient orders and surplus production capability.
Besides, the enterprises have been overburdened by the rising labor costs, the declining product prices, and the benefit decline. All these problems make these enterprises suffer more in recent times. In addition, the industry has been haunted with talent and creativity shortage. The small and medium-sized enterprises are especially weak in R&D strength and short of talents and highly-skilled blue-collar workers, which have been the two “bottlenecks” for their further development.
Two totally different situations have emerged in the mining machinery industry: some small and medium-sized enterprises producing the “FAQ” (Fair Average Quality) products are now more problematic, while the orders for superior quality products by the leading enterprises can still meet the production demand.
Restructuring badly needed
This problem has been an inevitable barrier for the Chinese mining machinery industry.
In recent years, China has become the proverbial “ world factory” with its rich natural resources and abundant cheap labor force. As a latecomer in the manufacture industry, the Chinese mining machinery industry has been selling its products at a low price to Vietnam, Iran, Africa and other developing countries and regions. However, the advantage of a low price has faded away in recent years.
According to analysis, in recent years, the active labor force in China had shrunk and many Chinese cities face the shortage in labor force. Also the workers’ wages keep rising, which is inevitably leading to an increase of manufacture costs and product prices – in the past 30 years, resource shortage had become more and more prominent. The costs for the Chinese mining machinery manufacturers to acquire natural resources had become higher and higher.
Most importantly, Chinese enterprises that insist on independent innovation can be picked off by one hand. Most domestic manufacturers prefer the price wars. They rack their brains about every production link that can reduce the cost; with the under-developed technology, they resort to a cheap and even undesirable material or to reducing the production costs, which also lowers the product quality.