"Sinosteel Corp, a leading State-owned steel trader, admitted on Tuesday that the company is struggling with financial issues amid an ongoing steel industry downturn, domestic news portal finance.qq.com reported. Sinosteel confirmed that it failed to recover some of its accounts receivable, but that its operations are still going on as normal, according to the report, in response to media allegations that the company's overdue bank loans have reached tens of billions of yuan, involving Industrial and Commercial Bank of China (ICBC) and Bank of Communications (BOCOM). In response to this, ICBC was quoted by people.com.cn on Tuesday as saying that ICBC only accounted for 1.3 percent of Sinosteel's total loans, and Sinosteel so far has not defaulted on loans provided by ICBC. Calls and an e-mail inquiry made to Sinosteel from the Global Times remained unanswered and neither ICBC nor BOCOM could be reached by press time. Analysts attributed Sinosteel's problem to the gloomy steel industry as well as the company's unprofitable overseas investments. "Sinosteel has devoted a lot of effort to the acquisitions of iron ore projects around the world, but at present none of its investments have made any big fortune yet," Hu Yanping, an industry analyst at Beijing-based steel information provider custeel.com, told the Global Times Tuesday. For instance, in 2005, Sinosteel announced it would co-develop the Weld Range iron ore mining project in Australia with local mineral company Midwest. But the $2 billion project was suspended in 2011 due to setbacks in the development of the Oakajee port and rail project, which was reportedly expected to be completed in 2015 and cost Sinosteel $100 million per year. Sinosteel had revenue of 139.9 billion yuan ($22.8 billion) in 2013, down from 149.7 billion yuan a year earlier, according to the company's annual sustainability reports on its website. Hu noted that those unsuccessful investments would continue putting significant pressure on the company's cash flow, especially when steel trading, its core business, has also been dampened by the declining steel price."
CDU Price at posting:
$1.60 Sentiment: None Disclosure: Not Held
