Some interesting scuttlebutt from FXStreet:
“Speculation is that a small steel mill in China may have defaulted last Friday and that iron ore traders were forced to liquidate stocks to repay loans secured by iron ore.”
…Argus adds: “With demand fundamentals softening and steel mills and trading firms struggling with cash constraints, news of a default has led to the wholesale price declining. But markets are misreading the cause of the sell-off, a London-based analyst said. It is not China’s first bond default by a solar panel company last week that has set off credit worries in the steel sector, it is the potential first default of a steel mill on 7 March that is symptomatic of the industry.
Argus cited the analyst adding: “Right now no one knows where demand is or where to set it at, and you have this reverberation going on that default will lead to default…
“I think the mills are already defaulting, there is no question about that,” an international trader cited by Argus said. “Now what gets interesting is where do we go from here?”
Given it appears that some large portion of the financing scams around the port pile have been conducted by financially stretched mills it is not a big stretch to conclude some are approaching insolvency.
