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State-owned firm says it has financial difficulties as the economy decelerates
Sinosteel Corp President Jia Baojun is reported to have been removed from his post, according to people familiar with the situation, after the State-owned steel trader said it is facing financial difficulties.
The State-owned Assets Supervision and Administration Commission also discharged him from his position as chairman of unit Sinosteel Corp Ltd this month, according to two people who have seen an internal notification of his departure. An official from the Beijing-based Sinosteel said on Tuesday that the company is facing difficulties amid slowing economic growth, with some accounts receivable not collected on time.
Three years ago, Jia replaced Huang Tianwen, who was removed by the State-owned enterprises watchdog after the company was accused of inflating sales at its units by the National Audit Office. The most recent leadership change came as the trader battles tumbling steel prices that have sent its peers into financial trouble.
"Steel trading is money-losing, and Sinosteel hasn't done anything to effectively boost earnings in the past years," said Xu Zhongbo, chief executive officer of Beijing Metal Consulting Ltd. "Management's failure to bail out the company may eventually prompt the SASAC to restructure Sinosteel."
The company cannot immediately comment on the leadership change, said the Sinosteel official by phone on Wednesday.
Steel traders are having trouble repaying loans as prices in China tumbled 27 percent this year amid industry overcapacity and slowing demand from home builders. Steel reinforcement-bar futures in Shanghai on Tuesday fell to a record low for a fourth day. The January contract was up 0.3 percent to 2,624 yuan ($427) a metric ton on Wednesday by the 11:30 am local time break.
A court in Shanghai received 1,051 disputes worth a combined 11.4 billion yuan regarding lending to steel traders in the first quarter, the China Securities Journal reported in April.
Sinosteel on Tuesday denied a report on NetEase.com that said the company has over 10 billion yuan in overdue loans owed to banks, including the Industrial &Commercial Bank of China Ltd and Bank of Communications Co. Sinosteel, also an owner of metal mines, is taking measures to improve earnings and maintain cash flow, the official said.
Sinosteel, which bought Australian iron ore miner Midwest Corp for A$1.4 billion ($1.2 billion) in 2008 and has a stake in Rio Tinto Group's Channar ore mine, posted revenue of 140 billion yuan in 2013, according to its website, compared with 186 billion yuan in 2010. It transformed itself from being among China's top three steel traders into a mine owner.
China Minmetals Corp rejected a merger with Sinosteel because its assets were "excessively poor", the 21st Century Business Herald reported Jan 18, 2013, citing a person it didn't identify.
