Dropping Like Flies: Largest Steel Maker In China's Shanxi Province Defaults On CNY 3 Billion In Debt

Tyler Durden's picture


When we started discussing the upcoming onslaught of corporate defaults in "Minsky Moment" China, now that the bankruptcy seal has been broken, we warned that the worst is about to come.

Well, it's coming.

Overnight, Hong Kong's The Standard reported that in addition to the solar, coal and real-estate developer companies that are on everyone's radar as potential future bankruptcy candidates, one can also add steel makers to the list, with its report that Highsee Group, the largest private steel makers in Shanxi province has defaulted on CNY3 billion of debt, unable to repay its bonds on time.

According to The Standard, "Highsee Group's 3 billion yuan debt was overdue last week," the 21st Century Business Herald reported yesterday. "The company is running in red, and has failed to pay workers for months. Many of its furnaces have stopped operating."

The reason for this most recent collapse: the plunge of domestic steel prices , which have fallen to their lowest level in more than eight years in mid-March as a result of weak demand and a surge in output.

Earlier, Shanxi coal miner Liansheng Resources Group went bankrupt while its loans, which were packaged into a wealth management product distributed by China Construction Bank (0939), are likely to be bailed out. UBS Securities securities analyst Chen Li said it is the peak season for corporate debt dues. Up to 80 percent of the nation's trusts have obligations to meet within the second quarter, he added.

IBT adds that "Highsee Iron and Steel Group ... is just one of numerous steel mills facing issues in the country. Data from the National Bureau of Statistics revealed that China produced 2.22 million tonnes of crude steel a day over the first two months of 2014, Reuters reports. This record amount was manufactured even though demand wasn’t as strong."

It remains to be seen if Highsee is bailed out, however now that pretty much any corporation with exposure to the commodity and real estate space that has maturing debt is on the rocks, the PBOC may be better suited just to let the system cleanse itself, even if that means the collapse in both the Chinese stock market, which unlike the US is largely irrelevant (especially since it once again dropped below 2000 while the Hang Seng entered a bear market), but the bigger issue is that the Chinese housing bubble is set to burst both domestically and abroad, as we reported yesterday.

And lest readers are left with the impression that merely operational companies with direct exposure to the deleveraging carnage that is taking place in China - at least until such time as China unleashes another multi-trillion stimulus - are exposed, also overnight financial firm Southchina Futures announced it is terminating it business on "major operation risks."

From the company's website:

About South China Futures Brokerage Co. closure announcement


As the Company has significant business risks, some of the bank account was frozen Guizhou Court of Justice, in order to protect the legitimate rights and interests of investors, the company passed a resolution to stop the shareholders' meeting brokerage business futures, now specific announcement is as follows:


First, the announcement issued by the date, the South China Futures Brokerage Co., Ltd. (hereinafter referred to as "the South China Futures") is no longer accepting new customers open positions instructions.


Second, within five working days of the date of this announcement, make customers to handle the South China Futures cancellation procedures.


Third, the five working days after the publication of the notice, did not apply for cancellation procedures futures customer account funds will be transferred to the unified Huatai Great Wall Futures Co., Ltd. (hereinafter referred to as "Huatai Great Wall Futures").


Fourth, since the date of this announcement within ten working days from customers willing to open an account at Huatai Great Wall Futures, futures and South China Huatai Great Wall Futures will jointly provide customers with convenient handle channel, during the South China Huatai Great Wall Futures futures and customer acceptance , Tel: South Futures, (020) 38791617 ; Huatai Great Wall Futures, 4006280888.


Notice is hereby given.

Dropping like flies now.

We wonder how long until the US stock market, floating in its cloud of manipulated, centrally-planned oblivious innocence, realizes that a China on the verge of all out deflationary recession is not a good thing?

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Thu, 03/20/2014 - 08:13 | 4571672 GetZeeGold
GetZeeGold's picture



I think the problem is there's a lot less steel being used in flat screens and cell phones these days.


Carbon fiber.....that's the future.

Thu, 03/20/2014 - 08:17 | 4571682 Headbanger
Headbanger's picture

One word.....  Plastics......


Thu, 03/20/2014 - 08:18 | 4571685 THX 1178
THX 1178's picture

Whopee were all gonna die!

Thu, 03/20/2014 - 08:23 | 4571702 Bindar Dundat
Bindar Dundat's picture

They are letting their bad companies die......I like it.

Thu, 03/20/2014 - 08:30 | 4571718 cifo
cifo's picture

"Well, it's coming."

When? When? When? It's tiring waiting for it.

Thu, 03/20/2014 - 08:34 | 4571727 Manthong
Manthong's picture

I'm watching for the EU curve ball.

Thu, 03/20/2014 - 08:46 | 4571767 wallstreetapost...
wallstreetaposteriori's picture

The EU curve ball will be the re-pricing of risk in the sovereign bond market.  Oops.... we just realized that portugals and spain's government bonds didn't merit interest rates sub-4, which will just snowball the pending Yen carry margin call coming.  BLAM.... shit really starts to hit the fans.  Unfortunately, they will sell gold and us treasuries to probably buy $PLUG.  

Thu, 03/20/2014 - 08:49 | 4571776 TheGoldMyth
TheGoldMyth's picture

wallstreetapost... Maybe the central banks could buy the steel the same way they do with gold to keep the price of steel high???????????

Thu, 03/20/2014 - 08:54 | 4571786 TheGoldMyth
TheGoldMyth's picture

I mean...the logic is flawless...central banks buy up all (Excess that might accidently end up in the streets.) the gold to prevent margin calls and to keep the price of gold high. The same could be done with steel?

Thu, 03/20/2014 - 09:00 | 4571806 TheGoldMyth
TheGoldMyth's picture

Central banks could shuffle the steel back and forth to each other in a continuous process of buying it from each other to create the illusion of trade during periods of austerity and economic collapse. Ofr they could buy up the supply as it is being dug out of the ground, in much the same way they do with gold to keep the miners from going bust. Or to make it worthwhile digging it out of the ground.
Or their steel mining skills would get rusty...haha

Not often i crack a joke...

Thu, 03/20/2014 - 09:03 | 4571828 TheGoldMyth
TheGoldMyth's picture

If the central banks can print enough money to buy billions of tons of steel, and if they can find a big enough steel vault (Haha, another joke), they could make steel prices soar in much the same way they have been able to achieve with gold.

If they can make it scarce enough, steel might overtake the price of gold making it necesarry to find means of making cars out of specially alloyed gold leaf or the like. Hmm...sounds like sci-fi..but anything is possible.

Thu, 03/20/2014 - 09:12 | 4571854 TheGoldMyth
TheGoldMyth's picture

QE-Steel sounds marketable, and the problem of storage during inconvenient periods of austerity in a humungous steel vault so it cannot be stolen by thieves would solve the steal problem.....

Thu, 03/20/2014 - 09:18 | 4571876 medium giraffe
medium giraffe's picture

There's fucking loads of steel.  There's not very much Gold.

Now, if you'd have said Tungsten....

Thu, 03/20/2014 - 09:24 | 4571892 DeadFred
DeadFred's picture

Manipulate the paper steel market, that's the ticket.

Thu, 03/20/2014 - 09:30 | 4571911 TheGoldMyth
TheGoldMyth's picture

Nice one Dead Fred.....just 'steel' some paper.

Thu, 03/20/2014 - 11:31 | 4572491 ILLILLILLI
ILLILLILLI's picture

Long dumb iron bombs...redistributing iron atoms back to the environmet from whence they came for over 100 years now.

Thu, 03/20/2014 - 09:26 | 4571901 TheGoldMyth
TheGoldMyth's picture

medium giraffe, there are fucking loads of empty houses that have defaulted, empty stomachs, not very many full ones.

Now if you had said privately owned debt printing bankers......

Thu, 03/20/2014 - 09:43 | 4571961 medium giraffe
medium giraffe's picture

But I wouldn't say privately owned debt printing bankers.  Because there's fucking loads of those too!

Thu, 03/20/2014 - 10:20 | 4572128 Never One Roach
Never One Roach's picture

"The CEO could not be reached for comment...from his $6.8 million Californai Mansion."

Thu, 03/20/2014 - 09:22 | 4571883 TheGoldMyth
TheGoldMyth's picture

Goldsmiths could create a new super hard gold alloy by 'Steeling' the Gold, so it probably isn't as sci-fi as i first suspected earlier in my rant.

I guess they need to have all that excess inventory to steel the world later on.

Thu, 03/20/2014 - 10:13 | 4572099 OceanX
OceanX's picture

Why not virtual steel? All the same benefits of QE-Steel without the storage issues.  Of course, the humungous steel vault would put some of the real steel to use...

Thu, 03/20/2014 - 09:15 | 4571870 wallstreetapost...
wallstreetaposteriori's picture

Steel is so 1920's......  especially good steel.  Everyone loves the cheap recycled shit.  I grew up in Bethlehem and the remains of the steel industry continue to decay.  Besides.... since everyone on this planet thinks we will be living in flying cites within a decade.... steel wont work.. that shit is too heavy...  

Thu, 03/20/2014 - 09:28 | 4571909 astoriajoe
astoriajoe's picture

If by flying you mean falling off a financial cliff, steel should work just fine.

Thu, 03/20/2014 - 09:54 | 4572003 Boxed Merlot
Boxed Merlot's picture

Steel is so 1920's...steel wont work...


Especially since Dr. Young has shown the twin tower double cylinder design is no match for a decades old direct energy device.




Can you say Jericho?

Thu, 03/20/2014 - 09:41 | 4571953 lakecity55
lakecity55's picture

Confucious say:

Chicom steel rust faster than Swiss Steel.

Thu, 03/20/2014 - 08:49 | 4571777 idea_hamster
idea_hamster's picture

Whose map is that -- and why is Taiwan on it?

Thu, 03/20/2014 - 09:01 | 4571817 post turtle saver
post turtle saver's picture

good eye, good eye

Thu, 03/20/2014 - 09:07 | 4571840 1000 splendid suns
1000 splendid suns's picture

Officially the Republic of China, Taiwan is governed by China. You ask the Taiwanese and they'll say differently.


Thu, 03/20/2014 - 10:32 | 4572163 i-dog
i-dog's picture

Ask the Taiwanese and they'll tell you that President Ma is a China stooge. What they probably don't know is that he is also a Jesuit stooge.

Thu, 03/20/2014 - 10:35 | 4572187 elwind45
elwind45's picture

Once the defaults start traveling closer to the coast and engulfs some ranking party members in the whirlwind they will cut the defaults loose? Every money crisis in history starts in the countryside and migrates to the urban areas where the real power resides? This one could have two groups? One mad group heading to the coast another group made leaving the coast.

Thu, 03/20/2014 - 08:31 | 4571719 NoDebt
NoDebt's picture

Chinese don't distinguish much between good and bad.  They go more along the lines of state-backed or not state-backed in making their decisions.

Thu, 03/20/2014 - 09:39 | 4571950 lakecity55
lakecity55's picture

"Well, Brankfein, we forrow you advise, economy in big trouble. Now what we do?"

"I'll tell you for some of those shiny gold bars on your desk there, Wang Fu."

Thu, 03/20/2014 - 09:22 | 4571885 williambanzai7
williambanzai7's picture

Once they learn to get over failure, the real global monster will arrive.

Thu, 03/20/2014 - 09:44 | 4571965 Oh regional Indian
Oh regional Indian's picture

That is an incisive truth right there WB.

A large indian bank sold NPA's for the first time ever to a debt restructuring company last week.

A sign of what you said....interesting.


Thu, 03/20/2014 - 08:24 | 4571708 Headbanger
Headbanger's picture

Yes!  Just like Flight 370 got swallowed by a black hole according to CNN:


You can't make this shit up!

Thu, 03/20/2014 - 08:32 | 4571715 GetZeeGold
GetZeeGold's picture



You can't make this shit up!


Actually....pretty sure they did.

Thu, 03/20/2014 - 09:09 | 4571838 furgheddubouddit
furgheddubouddit's picture

I think that's the same excuse the FED is preparing to use once the Germans figure out that their gold actually isn't there any more:

"ehhh, sorry....it was swallowed by a black hole".

Thu, 03/20/2014 - 09:46 | 4571968 GetZeeGold
GetZeeGold's picture



Here's my newest favorite investigative news source...comes sans black holes.


Thu, 03/20/2014 - 09:30 | 4571914 RSloane
RSloane's picture

That is one of the best unintentionally funny vids I've seen in a long time. Thanks, HB. +1

Thu, 03/20/2014 - 09:36 | 4571943 lakecity55
lakecity55's picture

Somebody is watching too much Star Truck.

More likely a black, mach3 heat seeker air-air.

Thu, 03/20/2014 - 09:35 | 4571932 lakecity55
lakecity55's picture

Man, that one is a classic.

Dustbin Hoffman.

Thu, 03/20/2014 - 10:05 | 4572054 OceanX
OceanX's picture

Did you say plasmatics?



Thu, 03/20/2014 - 17:30 | 4574452 gallistic
gallistic's picture


Wendy was a true American badass....

Thu, 03/20/2014 - 08:17 | 4571683 onewayticket2
onewayticket2's picture

True, but demand for nails and nail guns is soaring

Thu, 03/20/2014 - 08:22 | 4571694 Sudden Debt
Sudden Debt's picture

I was long operation manuals for nail guns but nobody seems to be reading those...



Thu, 03/20/2014 - 08:20 | 4571691 Sudden Debt
Sudden Debt's picture

I'm all in on widgets right now. They say they use in everything right now and the economy is booming!!!

Thu, 03/20/2014 - 08:22 | 4571698 LawsofPhysics
LawsofPhysics's picture

Yes, never thought I would see the day when were driving plastic tractors, but here we are.

Thu, 03/20/2014 - 08:40 | 4571744 tradewithdave
tradewithdave's picture

Plastic nails too... Plastic guns courtesy of Cody Wilson and Defense Distributed... Naturally leads to plastic nail guns... doh. Blythe bailed on commodities at the perfect time. Long Netflix and The Graduate regardless of Putin's Netflix account being embargoed. Steel is a barbarous relic.

Thu, 03/20/2014 - 08:39 | 4571738 booboo
booboo's picture

 Bah, who needs cold rolled steel when there is paper, paper covers steel scissors every time I have played and I make the fucking rules.

Thu, 03/20/2014 - 08:42 | 4571749 Graph
Graph's picture

In most products they use LESS steel even where steel is required.

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