SHANGHAI Aug 7 Chinese banks are suing more
than 20 small and medium-sized steel traders based in Shanghai
for defaulting on their loans, in the latest sign that the
sector is buckling under slumping prices and poor demand.
China Construction Bank , China
Minsheng Banking Corp , Bank of
Communications Co Ltd and China Everbright
Bank are among the banks that have taken their
debtors to court as they sought to recover the millions owed,
according to court documents.
Steel traders have been struggling to service their debts as
the world's second-largest economy grows at its weakest pace in
three years, cutting demand for the material used in
construction and cars. Beijing warned banks in April against
lending to steel trading firms, worsening the credit crunch.
"We have seen more default cases since late last year. We
are now on high alert and are watching our clients closely,
particularly the small and medium-sized companies (SMEs)," an
official at Minsheng Bank told Reuters, declining to be
identified as she was not allowed to speak to the media.
The court documents did not list the amount owing to banks.
In an appeal in June to banks to keep credit lines open, a
group of Fujian steel traders based in Shanghai said their loans
totalled around 160 billion yuan ($25.10 billion) last year.
Shanghai rebar futures have slumped 18 percent from
the year's high hit in April to a record low of 3,631 yuan last
week, while rebar inventories in major Chinese cities surged 22
percent from a year earlier to 6.51 million tonnes as of last
Friday, Mysteel data showed.
LEGAL ACTION FUTILE
A hearing in Shanghai's Pudong court on Monday was
unexpectedly cancelled because both the court and the plaintiff,
Minsheng Bank, had been unable to deliver the writ of summon to
the owner of the firm, which is owing three million yuan to
Minsheng Bank's spokesperson could not be immediately
reached for comment.
Most of the 25 steel trading firms listed in the court
documents are small and medium-sized enterprises, some of which
do not have their own websites. The rest have a registered
capital of 10-to-50 million yuan each.
The case underscores the difficulties banks may encounter in
recovering their loans. Recent media reports that state-owned
mills, including Chongqing Iron and Steel Co, have also missed
deadlines to repay their debts. That suggests the whole sector
may be facing growing debt stress.
China's large steel mills have racked up a combined 300
billion yuan in liabilities as of the end of June, and financing
costs have risen 37 percent from a year ago, according the China
Iron and Steel Association.
($1 = 6.3742 Chinese yuan)
(Editing by Ryan Woo)