According to media report, steel trading companies in Shanghai, China are facing severe challenges in financing.
It is said that the inventory has increased and the banks implement tight credit control in the wake of the incidents in Jiangsu and Zhejiang provinces in which chairmen of steel enterprises escaped.
It is said that Chinese banks now have reduced credit loan for some steel companies by 23% and no more new loan offered. Furthermore, some Chinese banks even ask for early repayments.
Some inferior steel companies have suffered from liquidity problem. Those steel companies have multiple investments other than the steel trading, including in property and financial markets, while some use the land on which their factories stand as collateral to get loans from banks to lend to other businesses at high interest rates