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Steel trading companies in Shanghai cry out for help from banks

Steel News - Published on Wed, 27 Jun 2012

It is reported that steel trading companies in Shanghai allied to publish an open letter to banks and financial institutions that they need further support.

According to the letter, banks have decreased credit facilities for some steel companies by 23%. Almost no more loans are provided and some even ask for early repayments.

According to the China Business News, inventory pile ups and a sudden credit crunch were behind the spate of incidents in Jiangsu and Zhejiang provinces in which chairmen of steel enterprises ran away.

Mr Shao Chunhua vice general manager of the companies department at Bank of China said Banks have highly concentrated loans in the steel industry. For some banks, 70% of their acceptance bills are drawn with steel companies. Some banks are careless with collateral examinations and estimates and some collateral is even used multiple times.

Liquidity pressure comes from some inferior steel companies, said people close to the matter. Those companies have multiple investments, including in property and financial markets, while some use the land on which their factories stand as collateral to get loans from banks to lend to other businesses at high interest rates.

Among more than 60 steel companies in Shanghai, about 40 are concentrated in steel production and trade, according to the China Business News. Although banks have shown their willingness to help and differentiate policies on steel companies, this doesn\'t mean the steel industry will be a positive market.

Source - Morning Whistle


Posted By : admin on Wed, 27 Jun 2012
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