Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, in August 2023, several cities and regions in China have successively experienced steel trader debt default incidents. Provinces and cities affected include Sichuan, Nanjing, Hangzhou, Guizhou and others. Jiangsu, Henan, Wuhan and some others have issued risk notices to warn all companies to pay attention to risk prevention, not be greedy for low prices, avoid “blind transactions,” and work together to overcome the unfolding financial crisis.
In the meantime, according to information from China’s National Enterprise Bankruptcy and Reorganization Network, a large number of steel traders have entered the stage of bankruptcy and liquidation. In just the first two weeks of August, 21 sizable steel traders received court rulings for bankruptcy and liquidation. Officials from the China Iron and Steel Association said that, in the face of development difficulties, steel companies “should jointly strengthen self-discipline, pay close attention to the total demand and structural changes of the downstream steel consumption industry, and reasonably control the steel inventory level.” The steel companies should jointly “determine production by sales,” i.e. do not turn cash into inventory; “determine production by efficiency,” i.e. do not cause operational cost increase; and “determine sales by cash,” i.e. do not turn sales into collection obligations.
Source: Sina, August 14, 2023