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China's private steel firms face shuffle due to financial strain, report

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2015-04-10 GMT+8:00

BEIJING, Apr. 9 (Xinhua) -- Private steel enterprises in China confront a shuffle as the financial strain will force some out.

In 2014, banks planned a 1.5 trillion yuan loan quota for the country's steel sector. However, at the end of the year, banks recalled 150 billion yuan loans in advance, accounting for 10 percent of the total quota as they believed that the domestic steel sector is experiencing excessive capacities with bigger risk, according to the Xinhua-run Economic Information Daily on Thursday.

This year, banks will increase efforts in recalling loans to the steel sector in advance. It is worth noting that loans to state-owned steel mills were largely guaranteed, said Zhao Xizi, honorary chairman of the China Chamber of Commerce for Metallurgical Enterprises.

Due to the financial strain, some private steel enterprises are forced to borrow money from the shadow banking with interest rate ranging from 12 percent to 20 percent. The high borrowing rate pushes up their financing costs, Zhao added.

In 2014, of the 103 key private steel mills, 19 steel mills suffered losses of 7.8 billion yuan. In 2013, private steel mills incurred a loss of 3 billion yuan in total, data of the China Chamber of Commerce for Metallurgical Enterprises shows.

At present, large-scale business insolvency in the steel sector has not showed up. But, in the coming three to five years, a batch of steel enterprises will face the shuffle. Under pressure of the new environmental protection laws and banks' efforts in recalling loans in advance, those steel mills with weak competitiveness and sluggish performance will be forced out, said Zhao. (Edited by Hu Pingchao, hupingchao@xinhua.org)

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