It is also understood that in the first half of the year, among the “seven major heavy machinery” enterprises, CITIC Heavy Industries, Dalian Heavy Industry, and Northern Heavy Industries were profitable. Overall, the entire industry still faces difficulties.

    Collecting annual report information, many companies have set their 2013 business goals at over 8 billion yuan, striving to turn losses into profits. However, industry insiders analyze that it is not easy for companies with large losses like Erzhong Heavy Equipment to turn things around.

    Market in Difficulty

    The current situation of the heavy machinery industry is: after ten consecutive years of rapid development, the production scale has grown, low-end product production capacity is excessive, product homogenization is serious, products have the problem of not being finely manufactured, and there are few personalized, integrated, energy-saving and consumption-reducing products. Due to reduced market demand and previous redundant construction, there is insufficient task and low-price competition among enterprises.

    Take the current situation of China First Heavy Industries as an example. Currently, 90% of the domestic forged-welded hydrogenation reactors used by domestic petrochemical enterprises are produced by First Heavy, but the profit of this product has declined rapidly, now dropping to 40,000 to 50,000 yuan per ton, which is only half of the normal price. In addition, the price of rolls is also only half of the original. Enterprises report that complete sets of equipment are produced at a loss.

    It should not be ignored that the metallurgical equipment market still shows no improvement.

    Currently, the company's roll product production capacity is about 300,000 tons, but the current orders on hand are only 100,000 tons per year. Of the 4 machine tools placed in the roll workshop, 2 have stopped production, and equipment depreciation alone is a considerable expense.

    Dalian Heavy Industry admits that the challenges and pressures faced this time are unprecedented, and it can be said to be the most difficult year. Overcapacity in the domestic equipment manufacturing industry, rising comprehensive costs, price competition, and difficulty in collecting payments are still further increasing. Shanghai Heavy Machinery also stated that due to thin gross profit margins, high accounts receivable and inventory, and continued tight cash flow, it is difficult for the company to turn losses into profits in the short term.

    Own Shortcomings

    The person in charge of First Heavy believes that the difficulties of the enterprise are not only due to market reasons, but also four own reasons:

    First, the national industrial policy guidance support is inconsistent. In 1983, the heavy equipment manufacturing industry was the first to be pushed into the market, while the equipment needed for the country's development of light industry and other industries was introduced globally from the beginning, which is equivalent to us having to participate in international competitions just after learning to walk. The result is not only no performance, but also serious harm to the body, exacerbating “inherent deficiencies”.

    Second, the enterprise's working capital has always relied on bank loans, and any benefits have all turned into loan interest. The enterprise has no accumulation and can only maintain simple reproduction. In addition, the enterprise's accounts receivable are too high. First Heavy's accounts receivable reached 12.4 billion yuan in 2012, with little working capital and high financial costs. At the same time, the state had almost no technical transformation investment in the equipment manufacturing industry before the “Tenth Five-Year Plan”, and the capital base is extremely thin.

    Third, the characteristics of manufacturing enterprises have not changed much. In the world equipment manufacturing system, we can only do the lowest end of the value chain———manufacturing, in the dilemma of “working to make a living”.

    Fourth, traditional manufacturing enterprises basically still have the production characteristics of single-piece small-batch and single-piece non-batch, which is far from the “specialization, automation, informatization, and assembly line” production required by modern industry, resulting in low production efficiency.