From the FT, the battle for survival of those iron ore traders marked for extinction goes on:
Imports could continue to climb as iron ore traders take the place of steel traders in providing credit to mills. Traders affiliated with Chinese companies big enough to secure access to bank loans say they are fronting purchases on behalf of steel mills whose access to credit has been cut off.
Domestic steel traders had kept their suppliers afloat with their own credit lines until defaults last year caused banks to tighten lending to that sector. Last month, CITIC Bank wrote down $852m in bad loans, most of them to steel trading companies in the Yangtze River delta. And rings of steel traders in eastern China are under investigation for exceeding the limits on their personal credit cards in an attempt to stay afloat.
While the door to Chinese credit is closing, the window for overseas money is still open. Some iron ore traders say they are opening letters of credit overseas where interest rates are lower – particularly in Hong Kong or Singapore – to fund cargoes. “I’ve already lost money on the first three Capesize I brought in this year, so I will be even more dependent on foreign financing in future,” said the head of one private steel trading house, referring to ships that carry about 175,000 tonnes of ore.
Time to get a real job, methinks.
