As the most important raw material for construction machinery, steel not only determines product prices but also determines product performance and reliability. However, the overall quality level of steel for construction machinery in China urgently needs improvement.

    At present, China has become the world's largest construction machinery market. As the most important raw material for construction machinery, steel not only determines product prices but also determines product performance and reliability.

    It is understood that the self-sufficiency rate of most varieties of steel for construction machinery in China has reached 100%, and substantial progress has been made in the production of key steel materials such as high-strength steel plates for construction, high-strength threaded steel bars for earthquake-resistant buildings, alloy materials for spacecraft, and high-performance pipeline steel.

    At the same time, however, the market for steel for construction machinery in China has not yet been fully developed, and some high-end steel products still need to be imported.

    Overall, the current overall quality level of steel for construction machinery in China is not high, with only about 30% of products reaching the international advanced level in terms of physical quality. The direct consequence of this phenomenon is that compared with similar foreign products, Chinese construction machinery products still lag considerably in durability and reliability.

    Technology and quality urgently need improvement

    As an industry that consumes a relatively large amount of steel, construction machinery consumes more than 1.2 million tons of steel annually, including about 600,000 tons of medium and heavy plates; about 120,000 tons of pipes (seamless steel pipes and thick-walled pipes), accounting for 10%; 150,000 tons of bars annually, accounting for 13%; 250,000 tons of hot-rolled and cold-rolled thin sheets, accounting for 21%; and other steel products accounting for about 7%.

    Although the construction machinery industry absorbs a large amount of steel capacity every year, constrained by the technology of the domestic steel industry, the market for steel for construction machinery has not been fully developed, and some high-end steel products still need to be imported. For example, although China has achieved mass production of 60-100 kg-grade steel plates for construction machinery, high-strength construction machinery plates still suffer from low qualification rates and poor surface quality. Wear-resistant plates can also basically meet the needs of construction machinery, but high-end products still rely on imports. Although high-quality bars are fully capable of supplying the domestic market, they still cannot be widely used due to issues with stability and steel varieties.

    Overall, the current overall quality level of steel is not high, stability is lacking, downstream industries have not yet been able to use it efficiently and scientifically, and a service system providing complete material solutions for downstream industries has not yet been formed, which has become the biggest problem constraining China's steel market for construction machinery. After nearly a decade of development, although this problem has eased somewhat, it still cannot meet China's demand for high-quality steel for construction machinery.

    Increased usage, prices may rise

    Li Xinchuang, Executive Deputy Secretary-General of the China Iron and Steel Association, said that based on the overall development trend of the machinery industry in 2013 and considering the consumption-driving role of industries such as agricultural machinery, electrical and electronic equipment, and petrochemical and general machinery, it is expected that steel consumption in the machinery industry will maintain a low-speed growth trend in 2013, with annual steel consumption expected to reach 131 million tons, up 4.8% from last year.

    The construction machinery industry is one of the sub-sectors with the largest steel consumption in the machinery industry, consuming 15.2 million tons of steel last year, accounting for 12.2% of the machinery industry's steel consumption and 2.3% of total steel consumption. Steel used in the construction machinery industry is characterized by many varieties and a wide range of specifications, with medium and heavy plates, high-quality bars, and sections being the main consumed varieties.

    The construction machinery industry consumes the largest amount of medium and heavy plates, accounting for 63.1%; followed by bars, accounting for 20.0%; sections accounting for 8.1%; and other steel varieties accounting for 8.8%. Domestic mass production has been achieved for 60-100 kg-grade plates for construction machinery; large steel enterprises such as Baosteel and Ansteel have developed 100 kg-grade high-strength construction machinery plates; however, high-strength construction machinery plates still suffer from problems such as low qualification rates and low quality, which is a key weakness constraining prices.

    According to statistics on changes in the sales profit margin of steel enterprises from 2001 to 2012, a relatively high profit level was maintained before 2007, with 2004 reaching the highest value in recent years at 8%; since 2008, the profitability of Chinese steel enterprises has declined significantly, and the sales profit margin has dropped sharply, plunging the steel industry into operational difficulties.

    Li Xinchuang said that steel prices are expected to be higher this year than last year, but because deep-seated problems such as overcapacity and homogeneous competition cannot be resolved in a short period, it will be difficult for steel prices to rise significantly compared with last year. Looking at the whole year, China's steel prices are generally expected to show a trend of being low in the early period and high later, with volatile upward movement.

    Strengthen cooperation to seek win-win results

    The leading products of the construction machinery industry include a full range of products such as concrete machinery, road-building machinery, excavating machinery, piling machinery, hoisting machinery, and wind power equipment. Many products in this industry require large amounts of high-quality steel as raw material support.

    Li Xinchuang said that as the main raw material supplier for construction machinery products such as excavators, road rollers, rotary drilling rigs, loaders, truck cranes, and concrete pump trucks, the steel industry needs to strengthen inter-industry cooperation to promote the healthy development of both industries and achieve win-win results. On the one hand, the construction machinery industry can help the steel industry absorb excess capacity; on the other hand, because construction machinery has high requirements for steel quality, it can promote technological innovation among steel enterprises and improve steel quality, thereby promoting the sound development of the industry.