Banks sue steel traders after loan defaults
By Hu Xiaocen |
August 4, 2012, Saturday
|
Print Edition
Print Edition
LENDERS recently sued 20 steel trading companies in Shanghai that failed to repay loans, and market watchers said more credit defaults by steel traders may emerge.
Among the cases, China Minsheng Banking Corp sued Shanghai Huijin Steel Group Co, China Everbright Bank sued Shanghai Qiaoshou Steel Trading Ltd, and the Bank of Hangzhou filed a lawsuit against Shanghai Tianzhan Steel Co.
All of the trading companies had joint guarantees for the loans, but it did not protect the lenders as the steel industry has been hit by plunging profits since last year, Shanghai Securities News said yesterday.
The biggest steel trade industry association in Shanghai wrote an open letter to the banks in June, saying the industry has faced a cash-flow problem since the beginning of this year due to squeezed profit margins and slowing demand.
The chairman of the association said later at a forum that lenders had agreed to support the industry in Shanghai and that traders' credit lines would not be cut. China Minsheng even agreed to lower lending rates by 2 percentage points for the steel traders, according to information on the association's website.
"It's survival of the fittest for steel traders," China Galaxy Securities said in a research report. "The big traders have obvious advantages in capital and distribution channels. They will continue to expand and benefit from large-scale trading volumes. The medium-sized traders with financing difficulties have downsized their operations. They are waiting for opportunities. The small players have to exit. Given the current circumstances, lenders are cautious about lending money to steal traders."
Among the cases, China Minsheng Banking Corp sued Shanghai Huijin Steel Group Co, China Everbright Bank sued Shanghai Qiaoshou Steel Trading Ltd, and the Bank of Hangzhou filed a lawsuit against Shanghai Tianzhan Steel Co.
All of the trading companies had joint guarantees for the loans, but it did not protect the lenders as the steel industry has been hit by plunging profits since last year, Shanghai Securities News said yesterday.
The biggest steel trade industry association in Shanghai wrote an open letter to the banks in June, saying the industry has faced a cash-flow problem since the beginning of this year due to squeezed profit margins and slowing demand.
The chairman of the association said later at a forum that lenders had agreed to support the industry in Shanghai and that traders' credit lines would not be cut. China Minsheng even agreed to lower lending rates by 2 percentage points for the steel traders, according to information on the association's website.
"It's survival of the fittest for steel traders," China Galaxy Securities said in a research report. "The big traders have obvious advantages in capital and distribution channels. They will continue to expand and benefit from large-scale trading volumes. The medium-sized traders with financing difficulties have downsized their operations. They are waiting for opportunities. The small players have to exit. Given the current circumstances, lenders are cautious about lending money to steal traders."
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