Jinan Steel suspended financing plan with the credit crunch in steel industry

October 28 MetalBiz--According to the information on October 27, Jinan Steel announced notice that the board of the company decided to suspend issuing convertible bonds.

Chi Caigong, secretary of the board from Jinan Steel told reporters said the international crisis and market demand caused the company to make the aforesaid decision.

An anonymous senior analyst in steel industry said that the heavy and medium plate products have been the cores of the company, accounted for 50% of revenue income. However, since this year, the downstream demand in heavy and medium plate was sluggish, which led Jinan Steel to result in great losses and face with tight funds.

Public data showed that the heavy and medium plate demand of Jinan Steel mainly concentrates on ship, boiler and engineering machinery and etc., thereinto, the consumption in ship plate was largest. However, Xu Lejiang, chairman of Baosteel told reporters on early July this year that the ship plate demand is the weakest steel products in downstream industry.

At the same time, the export of Jinan Steel suffered great damage since this year. The aforesaid analyst said that the export of Jinan Steel occupied more than 10% in 2008 mainly with heavy and medium plate, while the export fell to zero in 2009.

Additionally, the reporters learned that Jinan Steel invested 3bln yuan in 2.5mln tons of 4300mm heavy plate production line this year, which was set to put into production in late September or early October originally, but it has not started in production yet.

The aforesaid analyst said that Jinan Steel' s capital demand may exceed 6bln yuan, but own funds as well as the capitals by loans from banks is limited, therefore, to issue convertible bonds to raise money is a more suitable way, but now the financing plan by convertible bonds failed and the company will face the financing predicament.

A principal from a state-owned enterprise in Shandong disclosed that "Jinan Steel's financing suspension may have something with the credit crunch of steel industry".

Chi Caigong said that the company will not consider to issue convertible bonds even if has financing demand.