- Daily Zen
Some of the Chinese banks and companies have discovered the fact that the steel that some of the loan defaulted firms pledged on was never present in the warehouses at all. The economy of China has faltered in the recent times thereby lowering the China steel price to a record low for a span of three years. The situation made it really tough for the traders and the mills to be at par with the debt payments that amounted to about $400 billion.
As the number of defaulters rose in China, the largest consumer of steel, the Chinese banks and lenders found that the receipts pledged for the metals as collateral are not always authentic. According to the sources from the industry, there are numerous cases that have been registered in which the receipts of the steel documented either belonged to some other company or has otherwise been pledged to multiple companies as collateral. These ghost inventories have impacted some of the wider ailments in the steel sector of China. Steel has now accounted for another drag in the economy of China with numerous bad loans either from the Chinese banks or its property sector. According to an unidentified trader the situation that has been revealed is only a small part of a wider picture that might ultimately lead to a slumping of the China steel price and also adversely affect the economy of China.
The Government of Shanghai has ordered a verification of the receipts for the metal stored by the various traders who have made financial deals with them. An employee has recently been arrested in Shanghai from the Baoyang Warehouse with the implication of sock verification of the warehouse. The stock will then be tallied with the receipt that the employee had issued while having a financial deal with a trading firm. Shanghai Minlurin is one more trading firm that has opted for the accounting of the stocks present in the warehouse. Similar such cases have emerged in many regions that have led to a halting of the transactions in the steel business of China thereby haunting the economy of China.
The Chinese banks have lowered it credit availability against the receipts of the warehouse. These banks have also raised their efforts of monitoring the warehouse stocks as a result of more and more emergence of the fake warehouse receipts. A temporary halt has also been laid on the acceptance of loans against collateral stocks of steel in the warehouses. According to some of the sources in the industry, the estimated account for bad debt that has already come to light amounts to about 5 billion Yuan in Shanghai itself keeping in mind the fact that Shanghai is among the biggest centers for the trading of steel in China. The China steel price has really suffered a major setback as a result of these frauds and fakes. Shanghai Yiye Steel Trade Market Management Co. Ltd is another name that has also been accounted in the long list of steel companies for forgery and fraudulent acts.