Money looms over the last straw of steel traders

Since 2011, the economic growth at home and abroad has slowed down, and the steel industry has encountered heavy pressure from high production capacity. The steel and steel enterprises that are located in the middle reaches of the steel industry chain, commonly known as steel traders, have already experienced the “chill” of the market before steel companies.

This reporter has learned that as of now, nearly half of the more than 10,000 steel-and-steel enterprises in Shanghai have already fallen, while the steel and steel enterprises in East China have also fallen by 20% to 30%. The reason is that the sudden arrival of the "money shortage" has become the last straw overwhelming the steel traders.

In the "winter", a large number of steel traders should go from here. The reporter recently had an exclusive interview with Chen Leiming, secretary-general of the China Metal Distribution Association. He appealed that domestic companies must speed up the transition from traders to service providers, while effectively extending the industrial chain and enhancing their ability to resist risks.

"To some extent, the current predicament is also a kind of frustration for steel companies. The latter does not need to transition from a simple trader to a service provider." Chen Leiming said that after three to five years of pain, Larger-scale advantage companies will emerge, and SMEs will also be more standardized, and the steel market will also be purified.

The "money shortage" is a result of the large demand for steel links, and the steel ** pass companies are generally small in scale and have few assets. UNPROFOR mutual protection was once the most common way for companies. As the name suggests, UNPROFOR Mutual Security is a group of steel companies that have “locked together” to obtain bank credit through the formation of an UNPAs group. Members assume mutual assurance responsibility, or the two companies protect each other and bear each other’s obligations. Joint guarantee responsibility.

"When the market is in a good situation, there is no problem with mutual insurance, and it is also an effective way for corporate financing. Once the market situation reverses, this type of financing will have problems. If one or more steel traders are in difficulty to pay, credit risk It will jeopardize other traders along the guarantee chain, and even a chain reaction that breaks the capital chain." Chen Leiming said that short-term loans and long-term investment are the main sources of risk.

In the actual operation, due to the low profits of the steel trade link, some steel and steel companies that operate in an irregular manner will invest their wealthy funds in real estate, banking, and other fields to pursue high profits. However, once there is a problem in the capital chain of one of the companies, other companies involved in joint security and protection will suffer, and the credit risk of steel trade will quickly spread and spread.

The reporter learned that since 2005, especially after the country’s investment policy of RMB 4 trillion was introduced, the steel trade that commercial banks issued through warehouse receipt pledges and joint guarantees and mutual guarantees has increased rapidly. According to reports, at the end of 2011, the total amount of steel trade in the country was nearly 1.89 trillion yuan, accounting for about 3.5% of the total banking industry. However, since 2011, due to the economic slowdown at home and abroad, the steel industry is constrained by overcapacity. The growth of the main steel industry has been slow, steel prices have fallen sharply, and the slow-moving steel products have become increasingly serious. It has become increasingly difficult for steel trading companies to operate.

"The events that occurred last year, such as the explosion of positions in Shanghai and the bosses, were actually examples. This is not a common phenomenon. However, these problems have caused a great deal of concern in the society, leading to a straight decline in the credibility of the entire industry and the bank's overall tightening." Chen Leiming said that in some places where the situation is better, banks will no longer expand credit lines, while in other places such as Shanghai, banks will only receive no loans. This kind of “brave braking” approach has caused great impact on steel companies. The impact has caused its situation to worsen.

Talking about the recent policy of canceling the lower limit of the bank's interest rate of 70%, Chen Leiming thinks this is definitely a kind of favorable policy.

“For the steel companies nowadays, there are only two options, either closing or continuing to survive.” Chen Leiming said that in the context of the country’s promotion of interest rate liberalization, bank ** interest rates may loosen and loosen. After the interest rate level is certainly lower than the high interest rate of private lending; but whether the actual operation can achieve expectations, remains to be seen.

Transition to a service provider For the current difficulties encountered by steel companies, Chen Leiming believes that in the long run, it is a good one, which will help the entire industry “squeeze out” the water and increase the degree of concentration.

Although many iron and steel production companies are now increasing the direct supply ratio, in Chen Leiming's view, the steel exchange enterprises are still irreplaceable.

"In addition to shipping radius and cost considerations, most of the steel production companies only sell their own products, and the Steel Express business is like a 'supermarket' and can provide more diversified products." Chen Leiming said, and the steel trade Need to advance the funds in advance, the settlement period is usually 1 to 2 months, and there is a certain market risk, compared to the strict control of the cost of steel, steel traders are more willing to bear this risk.

Talking about how to get out of the current predicament, Chen Leiming believes that steel companies must realize the transition from traders to service providers, and transition from gambling and gambling to service. At the same time, extending the industrial chain, engaging in deep processing, and shortening the supply chain are also transformative measures.

"Compared to the pure steel trade, it can be said that each step of deep processing is a profit point, and the development of deep processing will improve the anti-risk ability of steel enterprises." Chen Leiming said that even some of the stronger steel Through the participation of enterprises, through the participation of steel companies, participation in iron ore trade, steel processing and distribution centers and other methods to diversify risk, enhance overall strength.

It is worth mentioning that extending the industrial chain means shortening the supply chain and reducing logistics costs. By providing "point-to-point" services that allow direct access to users from steel mills, intermediate storage links are eliminated.

In the eyes of Chen Leiming, as in the steel industry, after undergoing a period of rapid development, the steel industry has now entered a stage of steady development. After at least three to five years of adjustment cycle, more large-scale advantageous enterprises will emerge, and the operation of SMEs will be more standardized, and the entire steel market will be purificated.