Steel carriers jam China's canal after price drop

Published: 27 Aug 2009 23:27:11 PST

SHANGHAI, Aug 28 - At least 150 carriers with a combined 75,000 tonnes of steel products have jammed China's Grand Canal near Hangzhou in eastern Zhejiang Province, as buyers refused to take custody of orders they'd made before a sudden price slump, local media reported.

Benchmark spot steel prices in China have plunged in the last two weeks after hitting a 10-month high in early August after analysts said prices had exceeded levels justified by domestic demand.

Now, some merchants, who had booked the steel products in July and speculated that prices would remain strong in August, were balking at accepting the high-priced goods as they were being delivered, the Daily Business, a Hangzhou-based newspaper reported.

Some merchants disappeared, leaving unclaimed goods at the ports and in carriers, prompting local commercial banks that had lent money to the merchants to put a freeze on the goods, the newspaper quoted a local port official as saying.

As a result, carriers crowded along stretches of the canal, unable to leave and unable to unload the ordered goods.

The Grand Canal was built some 1,400 years ago to connect fertile rice paddies south of the Yangtze River with the capital 1,800 kilometers to the north. It has since become an important internal shipping route.

Unlike the Yangtze River, shipping along the Grand Canal is dominated by small-scale, family-run operators, whose earnings were being squeezed by the logjam of steel product carriers.