Beijing News published an article in which it reported that Sinosteel may not be able to meet its obligation to pay an amount due that totals tens of billions of yuan. According to the article, the liabilities to asset ratio for Sinosteel has remained between 90 and 95 percent since 2009. Prior to 2009, the business model for the State-owned steel companies involved importing ore and doubling or tripling the price when re-selling the ore to domestic downstream steel mills. In late 2009, these downstream steel mills were allowed to import ore, thus eliminating the high profit margin for large State-owned companies. Sinosteel’s revenue dropped from 180 billion yuan in 2010 to 140 billion yuan in 2013. Another reason for the financial loss is that it has failed in a series of investments overseas.
Sinosteel’s Revenue Decline May Result in a Default
Sinosteel is under the China’s State-Owned Assets Supervision and Administration Commission. It has 86 subsidiaries, of which 63 are in China and 23 overseas. Their functions include developing and processing metallurgical mineral resources, trading and logistics of metallurgical raw materials and products, related engineering technical services, and equipment manufacture.
Source: The Beijing News, September 24, 2014