Police have started investigating a case involving CNY 100 million of bank debt instruments tied to some troubled steel transactions, and one expert says the industry could face more similar problems.
State owned trading enterprise Sinoma Equipment & Engineering Corp Ltd had reported to the police about 10 banker's acceptance bills, worth a combined CNY 100 million, going missing.
The bills are essentially a loan certificate that can be converted to cash at banks.
The firm's parent company, Shanghai-listed Sinoma International Engineering Co Ltd made the announcement on December 20.
The bills were used by Sinoma E&E to finance part of a purchase for CNY 120 million worth of steel. The firm said that it had not received any of the metal.
Police have ordered banks to freeze payouts to holders of the 10 banker's acceptance bills while they look for them and examine the whereabouts of steels that supposedly corresponded to two other bills of payment, each worth CNY 10 million.
Another 11 banker's acceptance bills, worth a total of CNY 98.4 million and tied to separate steel-trading contracts, were also called into question amid difficulties in tracking down steel that should be delivered.
It was too early to gauge how the incidents might affect the firm's books, the announcement said.
Sinoma E&E has focused on steel trading. At present, its steel-related businesses involve contracts with a combined value of CNY 2.1 billion.
The statement said that a slowdown in the steel market, aggravated by banks calling in loans to steelmakers and trading companies, has caused a crisis this year that affects the entire industry.
It added that the crisis has broken many steel trading companies' capital chains and put huge pressure on Sinoma E&E's operations.
The firm's bill problems indicate that the crisis is still spreading, Chen Jianwei, an analyst with Central China Futures, said on Weibo. He said he would not be surprised if similar incidents surfaced in the next few weeks.
