China steel firm goes bust as slowdown, supply glut bite; chairman of Jiangxi Steel sought to abscond with 200 million yuan after the company’s credit lines were suddenly cut off and the plant shut down

China steel firm goes bust as slowdown, supply glut bite

Wednesday, Jun 26, 2013

Reuters

BEIJING – A steel firm in the eastern Chinese province of Jiangxi has been declared insolvent and shut down after failing to pay its debts, adding to jitters in a sector struggling with overcapacity and weak prices, the China Business News reported on Wednesday.

China’s steel mills have been producing at near record rates in recent months despite a downturn in demand and a long decline in prices due to a massive supply glut. Industry experts have warned that closures are inevitable.China Business News said the chairman and general manager of Jiangxi Pingte Iron and Steel Co. Ltd., based in the city of Pingxiang, sought to abscond with 200 million yuan (S$41.4million) after the company’s credit lines were suddenly cut off and the plant shut down. Local authorities are currently conducting an investigation.

The Chinese steel sector has been saddled with heavy overcapacity for years, but the problem worsened after 2009, when a stimulus-driven construction boom encouraged mills to go into debt in order to finance further expansion.

Pingte, established in 1998, has an annual steel production capacity of 800,000 tonnes, and in 2009 embarked on a project aimed at improving its product line, spending 180 million yuan to upgrade its steel rolling equipment. However, its losses have mounted over the last two years, the newspaper said.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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