Chinese mining equipment manufacturer learns to innovate

As the international mining industry has hit increasingly hard times, domestic heavy-duty equipment manufacturers have worked harder to explore fresh opportunities in the global market.

Dalian Huarui Heavy Industry Group, a company listed on the Shanghai Stock Exchange, is pushing to win more contracts in international projects with large-sized State-owned enterprises.

It is in talks with 38 SOEs, including China Power International Development Ltd and China Railway Construction Group, said Shao Changnan, vice-president of DHHI, the biggest domestic manufacturer and exporter in the bulk materials handling machinery.

Its close cooperation with China Nonferrous Metal Industry's Foreign Engineering and Construction Co Ltd has made DHHI the most important supplier of bulk materials handling machinery for NFC. It has also had success with Iran's FST Co, a Teheran-based executor of projects in the mineral materials processing industry.

DHHI said it has exported nine sets of stacker-reclaimers, large machines used in bulk material handling, to Iran in the past three years.

Shao said the current market was much worse than in the 2008-10 downturn, since established customers that are engaged in ports, mining and wharves are under severe pressure.

That has hit DHHI's financial performance. In 2015, the group's operating revenue was 7.15 billion yuan ($1.08 billion), down 13.25 percent year-on-year.

Exports, however, remained strong and contributed almost half of revenues, and its foreign exchange earnings increased 10.4 percent.

The Dalian-based company, which has 10,000 workers, has established offices and operations in Germany, India, Malaysia, Thailand, South Africa, South Korea and Australia.

The company said a contract with Australia's Roy Hill Iron Mine project was the largest one for a stacker-reclaimer in the world, valued at nearly $160 million.

Shao said his group's annual exports are expected to double and reach $1 billion by 2020, taking advantage of the Belt and Road Initiative, a program aimed at improving infrastructure connectivity in Asia, Africa and Europe.

Zhu Yi, Asian metals and mining analyst at Bloomberg Intelligence, said the market environment for steel and iron ore will not change much in the short term.

In order to improve cash flow, some mining groups such as Anglo American Plc and Freeport-McMoRan Inc have been forced to sell assets, said Zhu.

"The heavy-duty equipment sector will certainly be influenced and will take time for it to recover as well," she said.

More Chinese heavy industry enterprises are responding to the challenges by improving their ability to handle global allocation of resources.